China's premier says Lenovo–IBM deal must succeed

A forthright message to management

Chinese Premier Wen Jiabao visited the Beijing offices of Lenovo Group last week, telling Lenovo executives that the company's acquisition of IBM's PC business must succeed, according to the website of the official China Daily newspaper.

Wen's visit to Lenovo came during a tour of Zhongguancun High-Tech Park, an area in northwestern Beijing that is the home base for many Chinese technology companies. He highlighted the need for Chinese tech companies, including Lenovo, to rely on innovation to increase their competitiveness.

"This acquisition by Lenovo has drawn international attention, and is an important attempt for its internationalisation. This must succeed, not only at present but also in [the] long run. And the key to the success lies in innovation," Wen said, quoted in the China Daily report.

Lenovo's acquisition of IBM's PC business is viewed in China as a symbol of the country's rising importance in the IT industry — but whether the deal will ultimately prove to be a success remains to be seen.

Lenovo executives have been upbeat about the acquisition, but financial analysts are generally more cautious with some saying it will take up to six months before the success of the deal can be fully assessed.

"It's obvious that we have to wait three to six months to know what's happening," says Helen Lau, an analyst at Celestial Asia Securities Holdings in Hong Kong. That is when the first financial results for the enlarged company will be made available, giving analysts a look at how the deal has worked out for Lenovo financially, she says.

"This wait-and-see attitude is reasonable but there are already certain signs that are positive," Lau says, adding she believes the acquisition will ultimately prove to be a success.

Among the positive signs cited by Lau, she points to the establishment of a global management team at Lenovo. The announcement in May that Lenovo joined forces with IBM, Microsoft, Intel, LANDesk and Symantec to establish an "innovation centre" in North Carolina also bodes well for the company, she says.

Wen's visit to Lenovo's Beijing office is "a very positive sign", Lau says. Visits to Chinese companies by senior Chinese leaders are carefully planned events. Wen's visit to Lenovo is a sign of the government's confidence in Lenovo's ability to successfully integrate IBM's former PC business, Lau says.

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