Lenovo will still sell direct, says the CEO

LAS VEGAS — Although it may make personal computer resellers unhappy, the company that bought the IBM PC brand will continue to have a direct channel for its desktops and notebooks.

However, the incoming CEO of Lenovo promises there will be no conflicts with the channel.

“Will

we sell direct? Yes,” said Steve Ward in an interview Tuesday with CDN at IBM’s annual PartnerWorld conference here. “There are some instances when that’s exactly how the customer wants to buy.

“Will we compete with our channels? No. We’re upfront, we’re very clear about what our intention is, customer by customer, and we’ll work co-operatively with our channels.

Conflicts will be avoided “by making a decision on each customer and each product line on what our strategy is and staying with it.”

IBM sells online and in newspapers now, he noted. “We find as I talk to our partners that they fully recognize that’s part of the market they can’t reach. What we won’t do is try to move business from our partners to ourselves.”

Both IBM and Lenovo have a lot riding on the $US1.7 billion deal, which is subject to approval from U.S. regulators but scheduled to close in the second quarter.

To retain the loyalty of IBM resellers, which Lenovo will need to sell its products, it will keep things such as IBM’s warranty contracts with resellers, in addition to buying the ThinkPad and ThinkVantage brands and absorbing almost all of IBM’s PC sales, marketing and product development teams.

Lenovo will want IBM resellers for at least the business PCs it will sell. Some may want to pick up Lenovo’s consumer computers as well.

As much as possible both companies want buyers and the channel to believe that it will be business as usual.

At least one buyer thinks so: according to a Compugen executive here, the city of Toronto has agreed to buy $38 million in IBM PCequipment through the VAR.

However, Hewlett-Packard and Dell are sewing uncertainty among corporate buyers, says IBM.

So it’s no wonder at a presentation Tuesday on the deal, IBM executives who will be making the move pushed resellers to do record PC sales this month before the first quarter ends.

The idea is to do two things: First, send a message that the IBM PC business isn’t dying, and second, to get momentum for the months after the deal closes.

“If we can increase our revenue and growth in March, the rest of the year is a piece of cake,” said Fran O’Sullivan, who will become Lenovo’s chief operating officer.

Last year the PC division recorded a 23 per cent increase in revenues over 2003, she noted, 72 per cent of which went through the channel.

Teams are already working on marketing to strengthen knowledge of the Lenovo brand in North America, she said. Lenovo will also spend US$200 million around the world to generate demand.

But she also said some of the things IBMers won’t be taking to Lenovo are some of the giant’s administrative policies that slowed it down. “No status quo at the new Lenovo,” is the motto,” she said.

“We are going to be a very efficient, fast-decision PC supplier,” she said.

It isn’t clear, however, how fast those efficiencies will translate into increased reseller margins.

“Just as the margins did quite well last year — and look at the growth we had through last year — they’ll see the same kind of performance as over 2005,” said Ward.

“What will they see that’s different? They’ll see substantially more marcom [marketing and communications], substantially faster decisions on pricing and on terms. In addition they’ll see leasing rates from IBM that are unbeatable in the industry.”

Asked how important it is to retain or expand the number of IBM resellers, Ward replied that “it’s important to have the right resellers. We’re looking at the resellers who are improving customer satisfaction, and growing their business and our business. Those resellers we’re extremely loyal to. We need to grow into much broader, very small business, we need to grow into the VAR space and we’re putting clear focus on getting that done.”

To that end, he said, today [Wednesday] he will announce Lenovo’s new global channel manager.

The challenge will be Dell and it’s direct model. But IBM — and, he implied Lenovo — has done very well in small business and large accounts with ThinkPad and ThinkCentre products, said Ward.

In an interview after O’Sullivan’s presentation, Pierre Desjarlais, Montreal-based vice-president and general manager for eastern Canada for Compugen, a national systems integrator and VAR, was pleased to hear Lenovo won’t be burdened by IBM’s decision-making process. Compugen has decided to carry the IBM-Lenovo lines.

“If we want to go after direct manufacturers like Dell we need to have an organization that’s very price-conscious and can execute rapidly,” he said.

“We’ll be more than happy to probably be the number one Lenovo partner in Canada,” he said.

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Jim Love, Chief Content Officer, IT World Canada
Howard Solomon
Howard Solomon
Currently a freelance writer. Former editor of ITWorldCanada.com and Computing Canada. An IT journalist since 1997, Howard has written for several of ITWC's sister publications, including ITBusiness.ca. Before arriving at ITWC he served as a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times.

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