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Old 25th May 2007, 09:08 AM
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Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

I was sceptical, and thought they will need a few years to get it right, but they done the impossible in about a year or so.

1. Taking over an IBM division that loses hundreds of millions a year.
2. Swapping the IBM brand with an unknown Lenovo brand (they still got the thinkpad brand though).

Now they can move on to the servers.


Quote:
Lenovo Shares Gain Most in Six Years on Record Net (Update3)

By Janet Ong

May 25 (Bloomberg) -- Shares of Lenovo Group Ltd., the world's third-largest personal-computer maker, rose the most in more than six years after profit surged to a record, beating some analysts' estimates.

The stock jumped 14 percent to close at HK$3.66 in Hong Kong, contributing to a 16 percent gain this year. That's the largest increase since Sept. 25, 2000. Analysts at Bear Stearns Asia Ltd., Credit Suisse Group, and JPMorgan Securities Ltd. raised their ratings on the stock after the Chinese company posted two straight quarters of record profit.

The results may help reinforce optimism about Lenovo's ability to turn around the unprofitable PC division bought from International Business Machines Corp. in 2005. Chief Executive Officer Bill Amelio plans to add to the 1,000 jobs he cut since the acquisition, to rein in costs and challenge bigger rivals Dell Inc. and Hewlett-Packard Co.

``Bill Amelio has done his job,'' said Francis Lun, general manager at Fulbright Securities Ltd. in Hong Kong. ``The PC business is very cutthroat and they have to watch the margins very carefully.''

Profit in the fourth quarter ended March 31 was $60.1 million, more than double the $27.5 million median estimate of four analysts surveyed by Bloomberg.

Credit Suisse's Venugopal Garre, based in Hong Kong, raised the stock's rating to ``neutral'' from ``underperform,'' while JPMorgan's Charles Guo, also based in Hong Kong, upgraded Lenovo to ``overweight'' from ``neutral,'' citing improving profitability.

Job Cuts

Jack Tse, an analyst at Bear Sterns, raised Lenovo's rating to ``outperform''' from ``peer perform,'' citing the turnaround in the U.S. business and better-than-expected earnings.

Lenovo's fourth-quarter gross margin, or the percentage of sales left after deducting production costs, rose to a record 15.2 percent from 14 percent a year earlier, according to the Raleigh, North Carolina-based company.

Amelio plans to finish cutting 5 percent of employees this year and save $100 million. The 59-year-old chief executive said on April 19 he expects to slash 650 jobs this fiscal year ending March 2008, the second round of cuts since Lenovo acquired IBM's PC business.

Lenovo's profit, also helped by increasing sales of own- branded computers outside of China, rose to $161.1 million for the 12 months ended March, from $22.2 million a year earlier, it said in a statement on May 23. Shares in Hong Kong didn't trade yesterday because of a holiday.

To contact the reporter on this story: Janet Ong in Beijing at jong3@bloomberg.net
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Old 25th May 2007, 09:10 AM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Strong advertising throughout Europe.
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Old 25th May 2007, 09:45 AM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

I must admit, I was thinking of looking at Lenovo next time out, especially if they come packed with Linux.

This commentary demonstrates more than anything that most western analyst are just caught cold when it comes to China. Not a bloody clue!
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Old 25th May 2007, 10:00 AM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

I'm not in the PC biz, perhaps someone from the trade can explain this phenomenon.

I'm sure that if IBM knew that their PC division could be turned around so easily, they would not sell, i think?
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Old 25th May 2007, 10:39 AM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Quote:
Originally Posted by touchring
I'm not in the PC biz, perhaps someone from the trade can explain this phenomenon. I'm sure that if IBM knew that their PC division could be turned around so easily, they would not sell, i think?
IBM has been moving for years from hardware to software and consulting.
Their stock is up probably 30% in the last year, with 80 billion dollars or thereabouts in sales.

From wikipedia: As of 2004, IBM had shifted much of its focus to the provision of business consulting & re-engineering services from its hardware & technology focus. The new IBM has enhanced global delivery capabilities in consulting, software and technology based process services - and this change is reflected in its top-line.
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Old 25th May 2007, 10:49 AM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Quote:
Originally Posted by touchring
I'm not in the PC biz, perhaps someone from the trade can explain this phenomenon.

I'm sure that if IBM knew that their PC division could be turned around so easily, they would not sell, i think?

IBM does not have an optimal internal structure when it comes to international logistics regarding hardware. This is fine if the hardware is top-dollar, but it actually caused them to lose money on the low-margin end-user stuf. They are just too large to become more agile in logistics.

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Old 25th May 2007, 11:12 AM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

My understanding is that it is two fold:-
- close links to Intel (very close)
- & mass production & sales in China

Basically a successful mix of cheap production base costs and cheap cheap retail prices within China (and above average "for China" advertising).
Clever really as the most expensive computer components are the CPU and any proprietary chipsets on the mainboard that one must use.

It shows what cheap mass production and good market penetration in a place like China can achieve with a couple of spare dollars.
All fuelled by Intels lowered profits, supporting components like Seagate drives now being mainly China made cheaply.
Plus China's fast economic growth, fuelling a fast growing middle class that all want a PC, DVD, TV and mobile phone of course etc....

They will remain strong as long as they can keep their China sales running (and I think they can now)... and they certainly have room to grow exports, with Dell and others now all sourcing the majority of parts out of China (but at a distance compared to Lenovo who I understand is strongly linked to production outside of just it's Intel links as well).

As someone mentioned - IBMs problem was always high costs of hardware (this is now Lenovo's strongest point)

Interesting comments here that people would consider buying this brand now - shows how far they have come in a short time.

PS: back to the forum, I wonder how many computer related keyword IDNs Lenovo owns? (bet it is only their brand one... so who's going to teach them about IDN and sell them the others?).
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Old 25th May 2007, 11:26 AM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Although, it was originally built by IBM, the PC was regarded internally as a novelty without much commercial potential. It only took off as IBM compatible, as other players poured into the market. If IBM had taken the trouble to nail the contracts with Microsoft down properly, Microsoft would still be a minnow.

IBM then struck back once they realises where things were going. There strategy was to differentiate their product by making it incompatible. Basically, the just did not get understand the market or see the potential for their own product. Failure was well deserved.
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Old 25th May 2007, 12:03 PM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Quote:
Originally Posted by Asiaplay
They will remain strong as long as they can keep their China sales running (and I think they can now)... and they certainly have room to grow exports, with Dell and others now all sourcing the majority of parts out of China (but at a distance compared to Lenovo who I understand is strongly linked to production outside of just it's Intel links as well).

As someone mentioned - IBMs problem was always high costs of hardware (this is now Lenovo's strongest point).

I'm not convinced. Isn't IBM PCs also made in China, or they got ripped off by their OEM supplier? As for intel, do they treat IBM as a lesser client than Legend?
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Old 25th May 2007, 12:10 PM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Quote:
Originally Posted by touchring
I'm not convinced. Isn't IBM PCs also made in China, or they got ripped off by their OEM supplier? As for intel, do they treat IBM as a lesser client than Legend?

<<Amelio plans to finish cutting 5 percent of employees this year and save $100 million. The 59-year-old chief executive said on April 19 he expects to slash 650 jobs this fiscal year ending March 2008, the second round of cuts since Lenovo acquired IBM's PC business.>>

Don't you actually read anything before commenting?
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Old 25th May 2007, 12:14 PM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Quote:
Originally Posted by Rubber Duck
<<Amelio plans to finish cutting 5 percent of employees this year and save $100 million. The 59-year-old chief executive said on April 19 he expects to slash 650 jobs this fiscal year ending March 2008, the second round of cuts since Lenovo acquired IBM's PC business.>>

Don't you actually read anything before commenting?

PC makers slash jobs all the time, nothing new and not something that IBM can't do previously.


http://www.sci-tech-today.com/news/H...d=10100B9ZEZFM

Hurd's Cost-Cutting Efforts Pay Off
By Jordan Robertson
May 17, 2007 10:45AM

Hewlett-Packard has cut about 15,000 jobs under a massive restructuring launched in 2005 -- with some 2,500 more workers expected to leave HP by the end of the month as part of an early retirement program initiated last quarter. But HP CEO Mark Hurd says there is still plenty of room left to cut.

Last edited by touchring; 25th May 2007 at 12:20 PM..
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Old 25th May 2007, 12:23 PM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Your ability to go off at tangents is truly legendary.

My point was that your previous point was wholly negated by the fact the at Levono own IBM PC and have done so for several years which you should have known, but was in any case covered in the original article, which clearly you did not read. You then go on to make wild hypothetical allegations before changing tact as though nothing as happened. This seems to part of an ongoing pattern of complete disinformation. The really scary thing is that some people on here still actually listen to you!
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Old 25th May 2007, 12:28 PM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Quote:
Originally Posted by Rubber Duck
Your ability to go off at tangents is truly legendary.

My point was that your previous point was wholly negated by the fact the at Levono own IBM PC and have done so for several years which you should have known, but was in any case covered in the original article, which clearly you did not read. You then go on to make wild hypothetical allegations before changing tact as though nothing as happened. This seems to part of an ongoing pattern of complete disinformation. The really scary thing is that some people on here still actually listen to you!

God bless u.

I don't really care whether ppl listen to me or not. People here are generally not stupid, they know what they are doing. I'm here just to share information and news from reputable news agencies like CNN and Bloomberg to a generally Westerner community that may not know what is going on.

Btw, Lenovo IBM PC buyout got approved on March 2005 - http://news.com.com/2100-1003_3-5605...l?tag=nefd.top

How fast do you think the managers at Lenovo can work within this 2 years? How much notice is required to layoff people?

Last edited by touchring; 25th May 2007 at 12:40 PM..
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Old 25th May 2007, 12:39 PM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Quote:
Originally Posted by touchring
God bless u.

I don't really care whether ppl listen to me or not. People here are generally not stupid, they know what they are doing. I'm here just to share information and news from reputable news agencies like CNN and Bloomberg to a generally Westerner community that may not know what is going on.
If they listen to you. then they sure as hell won't have a clue as to what is going on.

I believe in the freedom of expression but when that privilege is used to seize the microphone and talk bollocks the whole time, then it would seem that the some checks and balances are needed.
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Old 25th May 2007, 12:41 PM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Quote:
Originally Posted by Rubber Duck
If they listen to you. then they sure as hell won't have a clue as to what is going on.

I believe in the freedom of expression but when that privilege is used to seize the microphone and talk bollocks the whole time, then it would seem that the some checks and balances are needed.

Checks are most welcomed.
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Old 25th May 2007, 01:12 PM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Go ahead and talk bollocks while I enjoy my just taken out of the box Lenovo ThinkVision 20" rotatable flat screen monitor :-)

I've been waiting to get rid of this IBM Trinitron 19" tube behemoth off of my work desk for 4 years now! Finally, the day has come.

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Old 25th May 2007, 03:47 PM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Hi Touchring,

Quote:
Originally Posted by touchring
I'm not convinced. Isn't IBM PCs also made in China, or they got ripped off by their OEM supplier? As for intel, do they treat IBM as a lesser client than Legend?
IBM have never had powerful sourcing- and still don't in my own opinion... basically they use stable technology (but generally not latest technology / old generally) - so margin is made on the brand and cheaper components - techs love them as they fail less... people like me hate then as you pay a premium for something old... so they are sluggish, but will not fail so fast (and here they only have a position in the business laptop sector really). This is even more true in a market like Hong Kong which often gets used as a test market for new technology.

Saying this, Lenovo also makes computers which last like other appliances are made these days - don't expect to still be using one in 10 years (even if you are happy with it for your junior secretary - as it won't be running that long!).

I personally would not buy them - and choose based on parts made in Taiwan and Korea where possible (although this is getting difficult for hard-disks, where supply is based out of China for here).

Without giving details... I would say definitely yes - treatment is not the same... but is about purchasing power, local knowledge & ownership of production as well.... I prefer to not say anymore (as my source is sensitive)... just comments

Personally think the cost structure is the deciding factor in Lenovo keeping their position (and as they are clearly #1 in the biggest, fastest growing market in the world and succeeding there due to their localised position - they will be hard to challenge unless someone invests heavily in production - which I have not seen yet and appears is not the strategy of the other main players).

Also you need to ask yourself - is it an open / trade free market they are based in?

What will be interesting to see is how they fair in the laptop market in the future... as this is much higher spec than a big box pc (but once again there is always a price point market).

Perhaps sell IBM the good IDNs - more likely to earn from them!!!

Cheers, Asiaplay

PS: Jackson - now that is the only component I might buy of theirs - if going for quality to price match - as I am not into pc games... hope you enjoy the screen.. be a nice change!!!

Last edited by Asiaplay; 25th May 2007 at 03:54 PM..
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Old 25th May 2007, 04:49 PM
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Re: Bloomberg - Lenovo Shares Jump, Head for Biggest Gain Since

Quote:
Originally Posted by Asiaplay
Hi Touchring,

IBM have never had powerful sourcing- and still don't in my own opinion... basically they use stable technology (but generally not latest technology / old generally) - so margin is made on the brand and cheaper components - techs love them as they fail less... people like me hate then as you pay a premium for something old... so they are sluggish, but will not fail so fast (and here they only have a position in the business laptop sector really). This is even more true in a market like Hong Kong which often gets used as a test market for new technology.

I see, sourcing...
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