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RealTime IT News

Lenovo Guarantees a Smooth Transition

While the ink has barely dried on Lenovo's contract to buy of IBM's PC business, executives are already claiming victory for their customers and partners.

Deepak Advani, who has just been named chief marketing officer of the new company, told internetnews.com IBM's personal computer business is all but guaranteed a smooth transition because very little will change in the short term.

"We've done a lot of research before making this announcement to get a better sense of why people buy," Advani said. "They love the products. They love the quality. They love the support. That isn't changing. The team that did the design on the ThinkPad and Think Center desktop will continue to do just that. The manufacturing groups will continue to operate right where they are."

Lenovo and IBM are taking a phased implementation, with products continuing to use the IBM logo as the primary brand for the next five years. That will transition to an IBM endorsement of a Lenovo-branded product and eventually a Lenovo-specific product.

IBM is trying to spread the message to partners quickly as rivals circle like sharks around the changes to the estimated $14 billion U.S. enterprise PC marketplace that Lenovo is entering.

Analysts have been chiming in with their opinions since the lid was lifted on the $1.25 billion cash and stock deal Tuesday night. Most are advising clients to review their desktop needs, as both HP and Dell are sure to offer enticing trade-up deals to IBM's existing customers concerned about a new provider taking over.

Advani said the pact is a far cry from the HP-Compaq merger as IBM picked a partner that had a strong brand with better with access to distribution channels in Asia-Pacific and around the world.

"We are seeing great synergies because have very limited overlap in products, customers, or country served, which is one of the main reasons we chose them," Advani told internetnews.com. "If you look at the total market, Lenovo has a strong presence in the consumer market. For IBM, more than half of our PC business comes from corporate accounts.

"What we plan on doing is a product portfolio for mid-market as well as consumer mid market. We'll be bringing some of out consumer products for consumer over to China on a selective basis. The new company will have 34 percent market share in China, the second largest behind United States."

Another incentive is that IBM can now escape some of its binding contracts with Microsoft and Intel . Advani said IBM would continue to use Windows on x86 architectures for the initial part of the deal. He declined to speculate on a future using IBM's Power PC chips running under a Linux distribution like China's Red Flag.

"We haven't gotten into that dialogue yet," he said.

One advantage IBM has, according to Advani, is that the company is wrapping its financing and maintenance around Lenovo's hardware. Under the terms of the deal, IBM Global Services will continue to provide remote customer support, maintenance, and other PC related technical support to Lenovo's clients.

In addition, Lenovo will pay IBM a fee to provide warranty support for Lenovo PCs. Lenovo will receive a sales fee to provide added incentive to sell financing and PC related support services. And, Lenovo will be the preferred supplier of PCs to IBM.

"This is more than a sale. It is an alliance," Advani said. "If you are an IBM ThinkPad or Think Center customer or partner, not a lot has changed. In fact, things will get better because there will be more opportunities going forward."

Big Blue is also not being stingy when it comes to its dedicated sales force of approximately 30,000 professionals. Advani said IBM will receive a sales fee based on a percentage of Lenovo's sales. The company will then compensate the teams in exactly the same way it has in the past.