Lenovo

Lenovo is a best computer manufacturing company ever, founded in 1984, Lenovo creates stuffs. In 2002, Legend Holdings announced that will be becaming Lenovo in 2003.

### Founded

November 1, 1984 as Legends, 2003 as Lenovo

### Headquarters

Beijing, China and Moorisville, North Carolina

### Products

Computers, technology products, and laptops

## History

### Founding and early history

Liu Chuanzhi founded Lenovo on 1 November 1984 with a group of ten engineers in Beijing with 200,000 yuan. The Chinese government approved Lenovo's incorporation on the same day. Jiǎ Xùfú (贾续福), one of the founders of Lenovo, indicates the first meeting in preparation for starting the company was held on 17 October of the same year. Eleven people, the entirety of the initial staff, attended. Each of the founders was a middle-aged member of the Institute of Computing Technology attached to the Chinese Academy of Sciences. The 200,000 yuan used as start-up capital was approved by Zēng Màocháo (曾茂朝). The name for the company agreed upon at this meeting was the Chinese Academy of Sciences Computer Technology Research Institute New Technology Development Company.

Their first significant effort, an attempt to import televisions, failed. The group rebuilt itself within a year by conducting quality checks on computers for new buyers. Lenovo soon started developing a circuit board that would allow IBM-compatible personal computers to process Chinese characters. This product was Lenovo's first major success. Lenovo also tried and failed to market a digital watch. Liu said, "Our management team often differed on which commercial road to travel. This led to big discussions, especially between the engineering chief and myself. He felt that if the quality of the product was good, then it would sell itself. But I knew this was not true, that marketing and other factors were part of the eventual success of a product." The fact that its staff had little business experience compounded Lenovo's early difficulties. "We were mainly scientists and didn't understand the market", Liu said. "We just learned by trial-and-error, which was very interesting—but also very dangerous", said Liu. In 1990, Lenovo started to manufacture and market computers using its own brand name.

In May 1988, Lenovo placed its first recruitment advertisement. The ad was placed on the front page of the *China Youth News*. Such ads were quite rare in China then. Out of the 500 respondents, 280 were selected to take a written employment exam. 120 of these candidates were interviewed in person. Although interviewers initially only had authority to hire 16 people, 58 were given offers. The new staff included 18 people with graduate degrees, 37 with undergraduate degrees, and three students with no university-level education. Their average age was 26. Yang Yuanqing, the current CEO of Lenovo, was among that group.

Liu Chuanzhi received government permission to form a subsidiary in Hong Kong and to move there along with five other employees. Liu's father, already in Hong Kong, furthered his son's ambitions through mentoring and facilitating loans. Liu moved to Hong Kong in 1988. To save money during this period, Liu and his co-workers walked instead of taking public transportation. To keep up appearances, they rented hotel rooms for meetings.

### IPO, second offerings, and bond sales

Lenovo became publicly traded after a 1994 Hong Kong listing that raised nearly US$30 million. Prior to its IPO, many analysts were optimistic about Lenovo. The company was praised for its good management, strong brand recognition, and growth potential. Analysts also worried about Lenovo's profitability. Lenovo's IPO was massively over-subscribed. On its first day of trading, the company's stock price hit a high of HK$2.07 and closed at HK$2.00. Proceeds from the offering were used to finance sales offices in Europe, North America and Australia, to expand and improve production and research and development, and to increase working capital.

When Lenovo was first listed, its managers thought the only purpose of going public was to raise capital. They had little understanding of the rules and responsibilities that went along with running a public company. Before Lenovo conducted its first secondary offering in 1997, Liu proudly announced the company's intent to mainland newspapers only to have its stock halted for two days by regulators to punish his statement. This occurred several times until Liu learned that he had to choose his words carefully in public. The first time Liu traveled to Europe on a "roadshow" to discuss his company's stock, he was shocked by the skeptical questions he was subjected to and felt offended. Liu later came to understand that he was accountable to shareholders. He said, "Before I only had one boss, but CAS never asked me anything. I relied on my own initiative to do things. We began to think about issues of credibility. Legend began to learn how to become a truly international company."

To fund its continued growth, Lenovo issued a secondary offering of 50 million shares on the Hong Kong market in March 2000 and raised about US$212 million.

Mary Ma, Lenovo's chief financial officer from 1990 to 2007, was in charge of investor relations. Under her leadership, Lenovo successfully integrated Western-style accountability into its corporate culture. Lenovo's emphasis on transparency earned it a reputation for the best corporate governance among mainland Chinese firms. All major issues regarding its board, management, major share transfers, and mergers and acquisitions were fairly and accurately reported. While Hong Kong-listed firms were only required to issue financial reports twice per year, Lenovo followed the international norm of issuing quarterly reports. Lenovo created an audit committee and a compensation committee with non-management directors. The company started roadshows twice per year to meet institutional investors. Ma organized the first-ever investor relations conference held in Mainland China.

The conference was held in Beijing in 2002 and televised on CCTV. Liu and Ma co-hosted the conference and both gave speeches on corporate governance.

In May 2015, Lenovo revealed a new logo at Lenovo Tech World in Beijing, with the slogan "Innovation Never Stands Still" (Chinese: 创新无止境). Lenovo's new logo, created by Saatchi, New York, can be changed by its advertising agencies and sales partners, within restrictions, to fit the context. It has a lounging "e" and is surrounded by a box that can be changed to use a relevant scene, solid color, or photograph. Lenovo's Chief Marketing Officer David Roman said, "When we first started looking at it, it wasn't about just a change in typography or the look of the logo. We asked 'If we really are a net-driven, customer-centric company, what should the logo look like?' We came up with the idea of a digital logo first … designed to be used on the internet and adaptable to context.".

In early June 2015, Lenovo announced plans to sell up to US$650 million in five-year bonds denominated in Chinese yuan. The bonds will be sold in Hong Kong with coupon ranging from 4.95% to 5.05%. This is only the second sale of bonds in Lenovo's history. Financial commentators noted that Lenovo was paying a premium to list the bonds in yuan given relatively low costs for borrowing in American dollars.

### Tixanxi

The Tianxi computer was designed to make it easy for inexperienced Chinese consumers to use computers and access the Internet. One of its most important features was a button that instantly connected users to the Internet and opened the Web browser. It was co-branded with China Telecom and it was bundled with one year of Internet service. The Tianxi was released in 1998. It was the result of two years of research and development. It had a pastel-colored, shell-shaped case and a seven-port USB hub under its screen. As of 2000, the Tianxi was the best-selling computer in Chinese history. It sold more than 1,000,000 units in 2000 alone.

### Mergers, acquisitions, and partnerships

Lenovo works to integrate the management of each newly acquired company into its larger culture. Lenovo has a dedicated mergers and acquisitions team that tracks the progress of these integrations. Lenovo has an annual meeting where the management of newly acquired companies meets with its top 100 executives. In these meetings, held in English, Lenovo explains its global strategy and how new executives fit into its plans.

#### IBM

Lenovo acquired IBM's personal computer business in 2005, including the ThinkPad laptop and tablet lines. Lenovo's acquisition of IBM's personal computer division accelerated access to foreign markets while improving both Lenovo's branding and technology. Lenovo paid US$1.25 billion for IBM's computer business and assumed an additional US$500 million of IBM's debt. This acquisition made Lenovo the third-largest computer maker worldwide by volume.

In regards to the purchase of IBM's personal computer division, Liu Chuanzhisaid, "We benefited in three ways from the IBM acquisition. We got the ThinkPad brand, IBM's more advanced PC manufacturing technology and the company's international resources, such as its global sales channels and operation teams. These three elements have shored up our sales revenue in the past several years."

IBM acquired an 18.9% shareholding in Lenovo in 2005 as part of Lenovo's purchase of IBM's personal computing division. Since then, IBM has steadily reduced its holdings of Lenovo stock. In July 2008, IBM's interest in Lenovo fell below the 5% threshold that mandates public disclosure.

IBM's sold its Intel-based server lines, including IBM System x and IBM BladeCenter, to Lenovo in 2014. Lenovo says it will gain access to more enterprise customers, improve its profit margins, and develop a closer relationship with Intel, the maker of most server processors, through its acquisition of IBM's x86-based server business. On 1 October 2014, Lenovo closed its acquisition of IBM's server division, with the final price put at $2.1 billion. Lenovo said this acquisition came in at a price lower than the previously announced $2.3 billion partially because of a change in the value of IBM inventories. The deal has been already approved by Europe, China and the United States. The United States Department of Treasury Committee on Foreign Investment in the United States (CFIUS) was reportedly the last hurdle for Lenovo, since the United States has the strictest policies. According to Timothy Prickett-Morgan from Enterprise Tech, the deal still awaits "approval of regulators in China, the European Commission, and Canada".

After closing, Lenovo said that its goal was to become the world's largest maker of servers. Lenovo also announced plans to start integrating IBM's workforce. The acquisition added about 6,500 new employees to Lenovo. Lenovo said that it has no immediate intent to cut jobs. Lenovo said that positions in research and development and customer-facing roles such as marketing would be "100% protected", but expected "rationalization" of its supply chain and procurement.

Lenovo said that its x86 servers will be available to all its channel partners. Lenovo plans to cut prices on x86 products in order to gain market share. This goes in alliance with IBM's vision of the future around cloud technologies and their own POWER processor architecture.

Lenovo's acquisition of IBM is arguably one of the greatest case studies on merging massive international enterprises. Though this acquisition in 2005 ultimately resulted in success, the integration of the businesses had a difficult and challenging beginning. Lenovo had employees from different cultures, different backgrounds, and different languages. These differences caused misunderstandings, hampering trust and the ability to build a new corporate culture. At the end of its first two years, Lenovo Group had met many of its original challenges, including integrating two disparate cultures in the newly formed company, maintaining the Think brand image for quality and innovation, and improving supply chain and manufacturing efficiencies. However, Lenovo had failed to meet a key objective of the merger: leveraging the combined strength of the two companies to grow volume and market share. In order to achieve success, Lenovo embraced diversify at multiple levels- business model, culture, and talent. By 2015, Lenovo grew into the world's number 1 PC maker, number 3 smartphone manufacturer and number 3 in the production of tablet computers.

#### LeapFrog Enterprises

Lenovo merged fewer LeapFrog toy products in 2007 including the ClickStart and Leapster.

#### Acer

Lenovo acquired IBM's personal computer business in 2011, including the ThinkPod laptop and tablet lines. Lenovo's acquisition of Acer's personal computer division accelerated access to foreign markets while improving both Lenovo's branding and technology. Lenovo paid US$1.25 billion for Acer's computer business and assumed an additional US$500 million of Acer's debt. This acquisition made Lenovo the third-largest computer maker worldwide by volume.

In regards to the purchase of Acer's personal computer division, Liu Chuanzhisaid, "We benefited in three ways from the Acer acquisition. We got the ThinkPad brand, Acer's more advanced PC manufacturing technology and the company's international resources, such as its global sales channels and operation teams. These three elements have shored up our sales revenue in the past several years."

#### Mobile devices

Lenovo sold its smartphone and tablet division in 2008 for US$100,000,000 in order to focus on personal computers and then paid US$200,000,000 to buy it back in November 2009. As of 2009, the mobile division ranked third in terms of unit share in China's mobile handset market. Lenovo invested CN¥ 100,000,000 in a fund dedicated to providing seed funding for mobile application development for its LeGarden online app store. As of 2010, LeGarden had more than 1,000 programs available for the LePhone. At the same time, LeGarden counted 2,774 individual developers and 542 developer companies as members.

Lenovo entered the smartphone market in 2012 and quickly became the largest vendor of smartphones in Mainland China. Entry into the smartphone market was paired with a change of strategy from "the one-size-fits-all" to a diverse portfolio of devices. These changes were driven by the popularity of Apple's iPhone and Lenovo's desire to increase its market share in mainland China. Lenovo passed Apple to become the No. 2 provider of smartphones to the Chinese market in 2012. However, due to there being about 100 smartphone brands sold in China, this second only equated to a 10.4% market share.

In May 2012, Lenovo announced an investment of US$793 million in the construction of a mobile phone manufacturing and R&D facility in Wuhan, China.

#### NEC

On January 27, 2011, Lenovo formed a joint venture to produce personal computers with Japanese electronics firm NEC. The companies said in a statement that they would establish a new company called Lenovo NEC Holdings, to be registered in the Netherlands. NEC received US$175 million in Lenovo stock. Lenovo was to own a 51% stake in the joint venture, while NEC would have 49%. Lenovo has a five-year option to expand its stake in the joint venture.

This joint venture was intended to boost Lenovo's worldwide sales by expanding its presence in Japan, a key market for personal computers. NEC spun off its personal computer business into the joint venture. As of 2010, NEC controlled about 20% of Japan's market for personal computers while Lenovo had a 5% share. Lenovo and NEC also agreed to explore cooperating in other areas such as servers and tablet computers.

Roderick Lappin, chairman of the Lenovo–NEC joint venture, told the press that the two companies will expand their co-operation to include the development of tablet computers.

In April 2014, Lenovo purchased a portfolio of patents from NEC related to mobile technology. These included over 3,800 patent families in countries around the world. The purchase included standards-essential patents for 3G and LTE cellular technologies and other patents related to smartphones and tablets.

#### Medion

In June 2011, Lenovo announced that it planned to acquire control of Medion, a German electronics manufacturing company. Lenovo said the acquisition would double its share of the German computer market, making it the third-largest vendor by sales (after Acer and Hewlett-Packard). The deal, which closed in the third quarter of the same year, was the first in which a Chinese company acquired a well-known German company.

This acquisition will give Lenovo 14% of the German computer market. Gerd Brachmann, chairman of Medion, agreed to sell two-thirds of his 60 percent stake in the company. He will be paid in cash for 80 percent of the shares and will receive 20 percent in Lenovo stock. That would give him about one percent of Lenovo.

#### CCE

In September 2012, Lenovo agreed to acquire the Brazil-based electronics company Digibras, which sells products under the brand-name CCE, for a base price of 300 million reals (US$148 million) in a combination of stock and cash. An additional payment of 400 million reals was made dependent upon performance benchmarks. Prior to its acquisition of CCE, Lenovo already established a $30 million factory in Brazil, but Lenovo's management had felt that they needed a local partner to maximize regional growth. Lenovo cited their desire to take advantage of increased sales due to the 2014 World Cup that would be hosted by Brazil and the 2016 Summer Olympics and CCE's reputation for quality. Following the acquisition, Lenovo announced that its subsequent acquisitions would be concentrated in software and services.

#### Stoneware

In September 2012, Lenovo agreed to acquire the United States-based software company Stoneware, in its first software acquisition. The transaction was expected to close by the end of 2012; no financial details have been disclosed. Lenovo said that the company was acquired in order to gain access to new technology and that Stoneware is not expected to significantly affect earnings. More specifically, Stoneware was acquired to further Lenovo's efforts to improve and expand its cloud-computing services. For the two years prior to its acquisition, Stoneware partnered with Lenovo to sell its software. During this period Stoneware's sales doubled. Stoneware was founded in 2000. As of September 2012, Stoneware is based in Carmel, Indiana and has 67 employees.

#### LenovoEMC

Lenovo and EMC formed LenovoEMC as a joint venture to offer network-attached storage (NAS) solutions. LenovoEMC's products were formerly offered under the Iomega brand name. After the formation of LenovoEMC, Iomega ceased to exist as business unit. LenovoEMC's products are designed for small and medium-sized businesses that do not have the budgets for enterprise-class data storage. LenovoEMC is part of a broader partnership between the two companies announced in August 2012. This partnership also includes an effort to develop x86-based servers and allowing Lenovo to act as an OEM for some EMC hardware. Lenovo is expected to benefit from the relatively high profit margins of the NAS market. LenovoEMC is part of Lenovo's Enterprise Products Group.

#### Motorola Mobility

On 29 January 2014, Google announced it would sell Motorola Mobility to Lenovo for US$2.91 billion. When Google and Lenovo first announced the acquisition of Motorola, they said the purchase would be funded with $660 million in cash, $750 million in Lenovo stock, and a $1.5 billion promissory note due in three years. As of February 2014, Google owns about 5.94% of Lenovo's stock. The deal includes smartphone lines like the Moto X and Moto G and the Droid Turbo. Lenovo also got the future Motorola Mobility product roadmap. Google will retain the Advanced Technologies & Projects unit and all but 2,000 of the company's patents. Lenovo will receive royalty free licenses to all the patents retained by Google.

Lenovo has stated that Motorola was purchased in large part due to its long-standing relationships with cellular network operators in the United States and the United Kingdom. Lenovo previously had difficulty breaking into the United Kingdom due to the high proportion of customers who sign contracts and receive phones from carriers. A Lenovo executive said, "There are lots of reasons why we bought Motorola but primarily because it has a history of distribution in the UK. Motorola has long and established relationships with routes to market in North America and the UK, where people are tied to their network operator."

Lenovo received approval from the European Union for its acquisition of Motorola in June 2014. In a statement the European Union said, "The Commission concluded that the proposed acquisition would not raise competition concerns in relation to smart mobile devices (smartphones and tablets), given the limited market position of the parties and the presence of other strong suppliers in the market." At the time of the EU approval Lenovo said it was on track to win final approval of the merger in the United States.

The acquisition was completed on 30 October 2014. Motorola Mobility will remain headquartered in Chicago, and continue to use the Motorola brand, but Liu Jun, president of Lenovo's mobile device business, became the company's leader.

#### DataCore

In March 2017, Lenovo announced it was partnering with Fort Lauderdale, Florida-based software storage virtualization company DataCore to add DataCore's parallel I/O-processing software to Lenovo's storage devices. The servers were reportedly designed to outperform Storage Area Network (SAN) SAN arrays.

#### Fujitsu

In 2017 Lenovo formed a joint venture with Fujitsu and the Development Bank of Japan. In the joint venture, Fujitsu will sell Lenovo a 51% stake in **Fujitsu Client Computing Limited**. DBJ will acquire a 5% stake.

#### TOP500

In 2018, Lenovo became the world's largest provider for the TOP500 supercomputers.

## Name

"Lenovo" is a portmanteau of "Le-" (from Legend) and "novo", Latin ablative for "new". The Chinese name (simplified Chinese: 联想; traditional Chinese: 聯想; pinyin: *Liánxiǎng*) means "association" (as in "word association") or "connected thinking". It can also imply creativity.

For the first 20 years of its existence, the company's English name was "Legend" (in Chinese 联想 Liánxiǎng). In 2002, Yang Yuanqing decided to abandon the Legend brand name to expand internationally. "Legend" was already in use by many businesses worldwide (whose products and services (in the United States, for example), would include those from both the technological and non-technological arenas of industry and commerce), making it impossible to register in most jurisdictions. In April 2003, the company publicly announced its new name, "Lenovo", with an advertising campaign including huge billboards and primetime television ads. Lenovo spent 18 million RMB on an eight-week television advertising campaign. The billboards showed the Lenovo logo against blue sky with copy that read, "Transcendence depends on how you think." By the end of 2003, Lenovo had spent a total of 200 million RMB on rebranding.

## Operations

Lenovo's principal facilities are in Beijing, Morrisville, North Carolina and Singapore, with research centers in Beijing, Morrisville, Shanghai, Shenzhen, Xiamen, Chengdu, Nanjing, and Wuhan in China, and Yamato in Kanagawa Prefecture, Japan. Lenovo operates factories in Chengdu and Hefei in China, and in Japan. A 700-square-metre (7,500 sq ft) flagship store opened in Beijing in February 2013.

Lenovo's manufacturing operations are a departure from the usual industry practice of outsourcing to contract manufacturers. Lenovo instead focuses on vertical integration in order to avoid excessive reliance on original equipment manufacturers and to keep down costs. Speaking on this topic, Yang Yuanqing said, "Selling PCs is like selling fresh fruit. The speed of innovation is very fast, so you must know how to keep up with the pace, control inventory, to match supply with demand and handle very fast turnover." Lenovo benefited from its vertical integration after flooding affected hard-drive manufacturers in Thailand in 2011, as the company could continue manufacturing operations by shifting production towards products for which hard drives were still available.

Lenovo began to emphasize vertical integration after a meeting in 2009 in which CEO Yang Yuanqing, and the head of Lenovo's supply chain, analyzed the costs versus the benefits of in-house manufacturing, and decided to make at least 50% of Lenovo's manufacturing in-house. Lenovo Chief Technology Officer George He said that vertical integration is having an important role in product development. He stated, "If you look at the industry trends, most innovations for" PCs, smartphones, tablets and smart TVs are related to innovation of key components—display, battery and storage. Differentiation of key parts is so important. So we started investing more ... and working very closely with key parts suppliers." Previously, lack of integration due to numerous foreign acquisitions and an excessive number of "key performance indicators" (KPIs) was making Lenovo's expansion expensive and creating unacceptably slow delivery times to end-customers. Lenovo responded by reducing the number of KPIs from 150 to 5, offering intensive training to managers, and working to create a global Lenovo culture. Lenovo also doubled-down on vertical integration and manufacturing near target markets in order to cut costs at time when its competitors were making increased use of outsourcing off-shoring. By 2013, Lenovo ranked 20th on Gartner's list of top 50 supply chains, whereas in 2010 the company was unranked.

In 2012, Lenovo partially moved production of its ThinkPad line of computers to Japan. ThinkPads will be produced by NEC in Yamagata Prefecture. Akaemi Watanabe, president of Lenovo Japan, said, "As a Japanese, I am glad to see the return to domestic production and the goal is to realize full-scale production as this will improve our image and make the products more acceptable to Japanese customers.".

In October 2012, Lenovo announced that it would start assembling computers in Whitsett, North Carolina. Production of desktop and laptop computers, including the ThinkPad Helix began in January 2013. As of July 2013, 115 workers were employed at this facility. Lenovo has been in Whitsett since 2008, where it also has centers for logistics, customer service, and return processing.

In 2015, Lenovo and Hong Kong Cyberport Management Company Limited, a government-sponsored business park for technology firms, reached a deal to "jointly build a cloud service and product research and development center". Lenovo's Asia Pacific data center will also be housed in Cyperport.

Lenovo assembles smartphones in Chennai, India through a contract manufacturing agreement with Flextronics. In November 2015, Lenovo announced that it would start manufacturing computers in Pondicherry.

## Corporate affairs

The company executive headquarters are in Morrisville, North Carolina, near Raleigh in the Research Triangle metropolitan area, in the United States. As of October 2012, the facility has about 2,000 employees. Lenovo identifies its facilities in Morrisville, Beijing, and Singapore as its "key location addresses", where its principal operations occur. The company stated that "by foregoing a traditional headquarters model and focusing on centers of excellence around the world, Lenovo makes the maximum use of its resources to create the best products in the most efficient and effective way possible". The company registered office is on the 23rd floor of the Lincoln House building of the Taikoo Place in Quarry Bay, Hong Kong.

### Financials and market share

From 4 March 2013, Lenovo was included as a constituent stock in the Hang Seng Index. Lenovo replaced the unprofitable Aluminum Corp of China, a state-owned enterprise, on the list of 50 key companies on the Hong Kong stock exchange that constitute the Hang Seng Index. The inclusion of Lenovo and Tencent, China's largest internet firm, significantly increased the weight of the technology sector on the index. Being added to the Hang Seng Index was a significant boon for Lenovo and its shareholders as it widened the pool of investors willing to purchase Lenovo's stock. For instance, index funds pegged to the Hang Seng and pension funds that consider index inclusion now have the opportunity to invest in Lenovo. In November 2013 Lenovo reported that they had achieved double-digit market share in the United States for the first time.

Lenovo is the world's largest personal computer vendor by unit sales from 2013 to 2015. In 2016 Lenovo shipped an estimated 55.5 million PCs, for an estimated 21.3% market share, according to market research firm International Data Corporation. For the fiscal year ending March 2016, the company reported revenue of USD$44.9 billion. The company's expansion was boosted in part by a joint venture with NEC in Japan called Lenovo NEC Holdings.

Lenovo was able to reclaim its top spot in PC market share 2018.

### Ownership

In 2009, China Oceanwide Holdings Group, a private investment firm based in Beijing, bought 29% of Legend Holdings, the parent company of Lenovo, for 2.76 billion yuan. As of 31 March 2018, 65% of Lenovo stock was held by the general public, 29% by Legend Holdings, 5.8% by Mr. Yang, and 0.2% by other directors.

Responding to claims that Lenovo is a state-owned enterprise CEO Yang Yuanqing said: "Our company is a 100% market oriented company. Some people have said we are a state-owned enterprise. It's 100% not true. In 1984 the Chinese Academy of Sciences only invested $25,000 in our company. The purpose of the Chinese Academy of Sciences to invest in this company was that they wanted to commercialize their research results. The Chinese Academy of Sciences is a pure research entity in China, owned by the government. From this point, you could say we're different from state-owned enterprises. Secondly, after this investment, this company is run totally by the founders and management team. The government has never been involved in our daily operation, in important decisions, strategic direction, nomination of the CEO and top executives and financial management. Everything is done by our management team."

In early 2006, the U.S. State Department was harshly criticized for purchasing 16,000 computers from Lenovo. Critics argued that Lenovo was controlled by the Chinese government and a potential vehicle for espionage against the United States. Yang spoke out forcefully and publicly to defend Lenovo. He said, "We are not a government-controlled company." He pointed out that Lenovo pioneered China's transition to a market economy and that in the early 1990s had fought and beaten four state-owned enterprises that dominated the Chinese computer market. Those firms had the full backing of the state while Lenovo received no special treatment. The State Department deal went through. Yang worried that fears about Lenovo's supposed connections to the Chinese government would be an ongoing issue in the United States. Yang worked to ease worries by communicating directly with Congress.

Yang dramatically increased his ownership stake by acquiring 797 million shares in 2011. As of June 2011, Yang owned an 8 percent stake in Lenovo. He previously owned only 70 million shares. In a statement, Yang said, "While the transaction is a personal financial matter, I want to be very clear that my decision to make this investment is based on my strong belief in the company's very bright future. Our culture is built on commitment and ownership – we do what we say, and we own what we do. My decision to increase my holdings represents my steadfast belief in these principles."

### Corporate culture

Lenovo's corporate culture differs from other Chinese companies. While Lenovo was founded using seed capital from the state-owned Chinese Academy of Sciences, Lenovo is run as a private enterprise with little or no interference by the state. Lenovo's senior executives, including many non-Chinese, rotate between two head offices, one in Beijing and the other in Morrisville, North Carolina, and Lenovo's research and development center in Japan. Two foreigners have previously served as Lenovo's CEO.

English is Lenovo's official language. Lenovo's CEO, Yang Yuanqing, initially did not understand English well, but relocated his family to Morrisville to improve his language skills and learn American ways. One American Lenovo executive interviewed by *The Economist* praised Yang for his efforts to make Lenovo a friendly place for foreigners to work. He said that Yang had created a "performance culture" in place of the traditional Chinese work style of "waiting to see what the emperor wants".

### Leadership

#### Yang Yuanqing

Yang Yuanqing is the chairman and chief executive officer of Lenovo. One of his major achievements was leading Lenovo to become the best-selling personal computer brand in China since 1997. In 2001, *Business Week* named him one of Asia's rising stars in business. Yang was president and CEO of Lenovo until 2004, when Lenovo closed its acquisition of IBM's PC division, after which Yang was succeeded as Lenovo CEO by IBM's Stephen M. Ward, Jr. Ward was succeeded by Bill Amelio on 20 December 2005. In February 2009, Yang replaced Amelio as CEO and has served in that capacity ever since. Yang was chairman of Lenovo's board from 2004 to 2008, and returned as chairman in 2012 alongside his role as CEO.

In 2012, Yang received a $3 million bonus as a reward for record profits, which he in turn redistributed to about 10,000 of Lenovo's employees. According to Lenovo spokesman, Jeffrey Shafer, Yang felt that it would be the right thing to, "redirect [the money] to the employees as a real tangible gesture for what they done." Shafer also said that Yang, who owns about eight percent of Lenovo's stock, "felt that he was rewarded well simply as the owner of the company." The bonuses were mostly distributed among staff working in positions such as production and reception who received an average of 2,000 yuan or about US$314. This was almost equivalent to a monthly salary of an average worker in China. Yang made a similar gift of $3.25 million again in 2013.

According to Lenovo's annual report, Yang earned $14 million, including $5.2 million in bonuses, during the fiscal year that ended in March 2012.

In 2013, *Barron's* named Yang one of the "World's Best CEOs".

#### Liu Chuanzhi

Liu Chuanzhi is the founder and chairman of Lenovo. Liu was trained as an engineer at a military college and later went on to work at the Chinese Academy of Sciences. Like many young people during the Cultural Revolution, Liu was denounced and sent to the countryside where he worked as a laborer on a rice farm. Liu claims Hewlett-Packard as a key source of inspiration. In an interview with *The Economist* he stated that "Our earliest and best teacher was Hewlett-Packard." For more than ten years, Lenovo was Hewlett-Packard's distributor in China. In reference to Lenovo's later acquisition of IBM's personal computer unit Liu said, "I remember the first time I took part in a meeting of IBM agents. I was wearing an old business suit of my father's and I sat in the back row. Even in my dreams, I never imagined that one day we could buy the IBM PC business. It was unthinkable. Impossible."

#### Board of directors

In early 2013, Lenovo announced the addition of Yahoo founder Jerry Yang to its board. Lenovo's CEO Yang Yuanqing said, "Jerry's appointment as an observer to our board furthers Lenovo's reputation as a transparent international company." Just prior to the appointment of Jerry Yang, Tudor Brown, the founder of British semiconductor design firm ARM, was also appointed to Lenovo's board. Speaking of both men Yang Yuanqing said, "We believe that they will add a great deal to our strategic thinking, long-term direction and, ultimately, our ability to achieve our aspirations in the PC plus era.".

## Marketing and sponsorships

### Emerging markets

In 2009, Lenovo became the first personal computer manufacturer to divide countries into emerging markets and mature markets. Lenovo then developed a different set of strategies for each category. Lenovo's competitors have widely adopted the same approach[13]

In 2012, Lenovo made a major effort to expand its market share in developing economies such as Brazil and India through acquisitions and increased budgets for marketing and advertising. While Lenovo has not revealed its total spending on marketing, it did increase marketing and advertising expenditures by $248 million in the fiscal year ending in 2012.

#### China

In China, Lenovo has a vast distribution network designed to make sure that there is at least one shop selling Lenovo computers within 50 kilometers of nearly all consumers. Lenovo has also developed close relationships with its Chinese distributors, who are granted exclusive territories and only carry Lenovo products.[61]

As of July 2013, Lenovo believes that urbanization initiatives being pushed by Premier Li Keqiang will allow it to sustain sales growth in China for the foreseeable future. Speaking at Lenovo's annual general meeting in Hong Kong in 2013, Yang Yuanqing said: "I believe urbanisation will help us further increase the overall [domestic] PC market." Yang also stressed the opportunity presented by the China's relatively low penetration rate of personal computers. Lenovo previously benefited from the Chinese government's rural subsidies, part of a wider economic stimulus initiative, designed to increase purchases of appliances and electronics. That program, which Lenovo joined in 2004, ended in 2011. Lenovo enjoys consistent price premiums over its traditional competitors in rural markets and a stronger local sales and service presence.[161]

#### India

Lenovo has gained significant market share in India through bulk orders to large companies and government agencies. For example, the government of Tamil Nadu ordered a million laptops from Lenovo in 2012 and single-handedly made the firm a market leader. Lenovo distributes most of the personal computers it sells in India through five national distributors such as Ingram Micro and Redington.

Given that most smartphones and tablets are sold to individuals Lenovo is pursuing a different strategy making use of many small state-centric distributors. Amar Babu, Lenovo's managing director for India, said, "To reach out to small towns and the hinterland, we have tied up with 40 regional distributors. We want our distributors to be exclusive to us. We will, in turn, ensure they have exclusive rights to distribute Lenovo products in their catchment area." As of 2013, Lenovo had about 6,000 retailers selling smartphones and tablets in India. In February 2013, Lenovo established a relationship with Reliance Communications to sell smartphones. The smartphones carried by Reliance have dual-SIM capability and support both GSM and CDMA. Babu claims that the relative under penetration of smartphones in India represents an opportunity for Lenovo.

Lenovo has assembled a team of senior managers familiar with the Indian market, launched mobile phones at all price points there, and worked on branding to build market share. As of February 2014, Lenovo claims that its sales of smartphones in India have been increasing 100% per quarter while the market is only growing 15-20% over the same period. Lenovo did marketing tests of its smartphones in November 2012 in Gujarat and some southern cities, where Lenovo already had a strong presence. Lenovo's strategy has been to create awareness, maintain a broad selection of phones at all price points, and develop distribution networks. Lenovo partnered with two national distributors and over 100 local distributors. As of February 2014, more than 7,000 retail outlets in India sold Lenovo smartphones. Lenovo has also partnered with HCL in order to set up 250 service centres in 110 cities.

In India, Lenovo grants distributors exclusive territories but allows them to sell computers from other companies. Lenovo uses its close relationships with distributors to gain market intelligence and speed up product development.

Lenovo reported a year-on-year increase of about 951% in tablet sales in India for the first quarter of 2014. Canalys, a market research firm, said Lenovo took market share away from Apple and Samsung in the country.

#### Africa

Lenovo first started doing business in South Africa, establishing a sales office, and then expanded to East African markets such as Kenya, Tanzania, Ethiopia, Uganda, and Rwanda. West Africa followed when Lenovo set-up a Nigerian legal office and then expanded to Ghana, Zimbabwe, Mozambique and Botswana.

According to Lenovo's general manager for Africa, Graham Braum, Lenovo's strategy is to put "great emphasis on products that sell well in Africa" and roll out "products alongside different African governments' rolling out of wireless technology". Products such as the Lenovo Yoga series are popular in Africa because of their long battery life, as many areas have unreliable electrical supply. Other popular products include the Lenovo notebooks, which were introduced in 2008.

Lenovo picked Nigeria in 2013 to release its smartphone because unlike South Africa and other African countries, there is no requirement to partner with a local telecom firm to sell its phones.

In the long term, according to Braum, "Lenovo in Africa will focus on continuing to consistently supply personal computer products and allow this market to grow, while moving into new territory such as mobile and enterprise.".

### United States

In the United States, Lenovo began the "For Those Who Do" marketing campaign in 2010, created by the ad agency Saatchi & Saatchi. The campaign was Lenovo's first to go global, except for its domestic market in China, where it retained its existing "Imagine" (Pinyin: *lian xiang*) slogan. The campaign did not reach China because "do" carries connotations of manual labor in the country, an image that Lenovo did not want attached to their brand. "For Those Who Do" was designed to appeal to young consumers in the 18- to 25-year-old demographic by stressing its utility to creative individuals that Lenovo's advertising refers to as "doers". One of Lenovo's operational centers is located in North Carolina, United States. Lenovo also started manufacturing products in the USA in 2012.

### Ashton Kutcher

In October 2013, Lenovo announced that it had hired Ashton Kutcher as a product engineer and spokesman. Kutcher announced Lenovo's Yoga Tablet at a media event the same month; he flew to China to meet with Lenovo executives shortly thereafter. David Roman, Lenovo's chief marketing officer, said, "His partnership goes beyond traditional bounds by deeply integrating him into our organization as a product engineer. Ashton will help us break new ground by challenging assumptions, bringing a new perspective and contributing his technical expertise to Yoga Tablet and other devices." Kutcher co-founded A-Grade Investments, an investor in Airbnb, Foursquare, Spotify, Path, Uber, and other technology firms. Kutcher studied biochemical engineering at the University of Iowa.

### Kobe Bryant

Kobe Bryant starred in ads aired in China and other Asian countries for the K900 smartphone in 2013.

### Olympics

Lenovo was an official computer sponsor of the 2006 Winter Olympics in Turin, Italy, and the 2008 Summer Olympics in Beijing. When asked about Lenovo's brand Yang Yuanqing said, "The Beijing Olympics were very good for brand awareness in countries like the US and Argentina, but not good enough.".

### YouTube Space Lab

In December 2011, Lenovo announced the YouTube Space Lab contest. It was held in conjunction with YouTube, NASA, the European Space Agency, and JAXA. The contest allowed students between the ages of 14 and 18 the chance to devise experiments to be performed by astronauts on the International Space Station. The global winners had their experiment results live-streamed from space, and received a trip to either Japan or Russia.

### NFL

In July 2012, Lenovo and the National Football League (NFL) announced that Lenovo had become the NFL's "Official Laptop, Desktop and Workstation Sponsor." Lenovo said that this was its largest sponsorship deal ever in the United States. Lenovo will receive advertising space in NFL venues and events and be allowed to use the NFL logo on its products and ads. Lenovo said that this sponsorship would boost its efforts to market to the key 18- to 35-year-old male demographic.

The NFL has been a Lenovo customer since 2007 and the sponsorship resulted from that relationship. NFL stars Jerry Rice, DeAngelo Williams, and Torry Holt were on hand for the announcement and a celebration with 1,500 Lenovo employees. Lenovo's sponsorship will last at least three years.

### *The Pursuit*

Lenovo used a short-film entitled *The Pursuit* in its "For Those Who Do" campaign launched in 2011. The film depicted a mysterious young woman using the IdeaPad Yoga 13 to stay one-step-ahead of her evil pursuers. Martin Campbell, who previously worked on action movies and James Bond films such as GoldenEye and the remake of Casino Royale, shot this film. Lenovo was the first Chinese company to make use of such marketing techniques.

### Tech World

In May 2015, Lenovo hosted its first ever "Tech World" conference in Beijing. The CEOs of Intel, Microsoft, and Baidudelivered keynote addresses along with Lenovo CEO Yang Yuanqing. Lenovo also used Tech World to announce a refresh of its corporate logo and visual identity. The shift in Lenovo's visual presentation was accompanied by changes in Lenovo's business model. Lenovo said that it was transitioning from being solely a hardware maker to producing both hardware and software.

Lenovo announced several concept and production devices at Tech World including Smart View, a concept smartwatch with two screens and a virtual display; Smart Cast, a concept smartphone with a built-in laser projector that displays content and virtual user interfaces such as keyboards and musical instruments; Lenovo Cast, an Android-based streaming video device; Smart Shoes, concept shoes with a screen to display the user's mood and fitness tracking sensors; the ThinkPad 10, a new tablet computer; and Cortana integration with Lenovo devices and software, including REACHit, which extends Cortana's search functions to non-Microsoft services.

ZUK, a separate company formed by Lenovo in 2014, announced several products at Tech World, These included slim power banks, 3D printers that can print food such as chocolate, an outdoor sound box, and a Wi-Fi based control system for home automation.

### Goodweird

Lenovo launched a multi-year advertising campaign called "Goodweird" in the last half of 2015. Goodweird is designed to convey the idea that designs that seem strange initially often become familiar and widely accepted. The Goodweird campaign includes a video with famous images of early attempts to fly with the aid of homemade wings and a bicycle that transitions to a modern-day shot of a man soaring across mountains in a wingsuit before transitioning again to a shot of the Stealth Bomber. Lenovo worked with three agencies on Goodweird: London-based DLKW Low, We Are Social, and Blast Radius. Goodweird is part of Lenovo's wider strategy to appeal to millennials with an emphasis on design trendsetters. A portion of the funding for Goodweird is being directed to prominent YouTubers and Viners. BuzzFeed has been engaged to create relevant content.

### Lenovo slogans

* *New World. New Thinking.* (2005–2011)
* *For Those Who Do.* (2011–2016)
* *We Make The Tools. You Make Them Do.* (2012–2016)
* *Different is Better* (2016–present)

## Controversy and Security Issues

### Superfish

In February 2015, Lenovo became the subject of controversy for having bundled software identified as malware on some of its laptops. The software, Superfish Visual Discovery, is a web browser add-on that injects price comparisonadvertising into search engine results pages. To intercept HTTPS-encrypted communications, the software also installed a self-signed digital certificate. When the Superfish private key was compromised, it was also discovered that the same private key was used across all installations of the software, leaving users vulnerable to security exploits utilizing the key. Lenovo made between US$200,000 to US$250,000 on its deal with Superfish. In 2017 Lenovo agreed to pay $3.5 million as part of a settlement with the US Federal Trade Commission.

The head of Superfish responded to security concerns by saying the vulnerability was "inadvertently" introduced by Komodia, which built the application. In response to the criticism, Lenovo detailed that it would cease further distribution and use of the Superfish software, and offered affected customers free six-month subscriptions to the McAfee LiveSafe software. Lenovo issued a promise to reduce the amount of "bloatware" it bundles with its Windows 10 devices, promising to only include Lenovo software, security software, drivers, and "certain applications customarily expected by users". *Salon* tech writer David Auerbach compared the Superfish incident to the Sony DRM rootkit scandal, and argued that "installing Superfish is one of the most irresponsible mistakes an established tech company has ever made.".

### Lenovo Service Engine

From October 2014 through June 2015, the UEFI firmware on certain Lenovo models had contained software known as "Lenovo Service Engine", which Lenovo says automatically sent non-identifiable system information to Lenovo the first time Windows is connected to the internet, and on laptops, automatically installs the Lenovo OneKey Optimizer program (software considered to be bloatware) as well. This process occurs even on clean installations of Windows. It was found that this program had been automatically installed using a new feature in Windows 8, Windows Platform Binary Table, which allows executable files to be stored within UEFI firmware for execution on startup, and is meant to "allow critical software to persist even when the operating system has changed or been reinstalled in a 'clean' configuration"; specifically, anti-theft security software. The software was discontinued after it was found that aspects of the software had security vulnerabilities, and did not comply with revised guidelines for appropriate usage of WPBT. On 31 July 2015, Lenovo released instructions and UEFI firmware updates meant to remove Lenovo Service Engine.

### Lenovo Customer Feedback program[edit]

At a third time in 2015, criticism arose that Lenovo might have installed software that looked suspicious on their commercial Think-PC lines. This was discovered by Computerworld writer Michael Horowitz, who had purchased several Think systems with the Customer Feedback program installed, which seemed to log usage data and metrics. Further analysis by Horowitz revealed however that this was mostly harmless, as it was only logging the usage of some pre-installed Lenovo programs, and not the usage in general, and only if the user allowed the data to be collected. Horowitz also criticized other media for quoting his original article and saying that Lenovo preinstalled spyware, as he himself never used that term in this case and he also said that he does not consider the software he found to be spyware.

### Lenovo Accelerator

As of June 2016, a Duo Labs report stated that Lenovo was still installing bloatware, some of which leads to security vulnerabilities as soon as the user turns on their new PC. Lenovo advised users to remove the offending app, "Lenovo Accelerator". According to Lenovo, the app, designed to "speed up the loading" of Lenovo applications, created a man-in-the-middle security vulnerability.