Lenovo Waltzes With EMC, Eyes Nokia 联想“牵手”EMC
There are a couple of interesting news bits today on PC giant Lenovo (HKEx: 992), including a smart-looking new tie-up with data storage giant EMC (NYSE: EMC), and rumors that the company is weighing a potentially disastrous bid for struggling cellphone giant Nokia (Helsinki: NOK1V). All this comes as analysts and Lenovo itself are predicting it could overtake struggling Hewlett-Packard (NYSE: HPQ) for the title as the world’s biggest PC maker by the end of this year, becoming the first major Chinese high-tech brand to take such a global title.
Let’s take a look first at the confirmed news, which has Lenovo and EMC announcing a strategic partnership that will include the formation of a joint venture to sell EMC’s servers and data storage equipment in China. (English article; Chinese article) From a shorter-term perspective, I quite like this joint venture because it will give Lenovo access to EMC’s rich portfolio of servers and data storage equipment, 2 areas where Lenovo hasn’t traditionally excelled but which will take on growing importance with the rapid growth of the Internet and cloud computing in the future.
From a longer-term perspective, the addition of servers and data storage equipment to its product line-up will help Lenovo if and when it eventually decides to focus on the more lucrative business of helping companies to build their own internal computing networks, an area that is part of the broader informational technology (IT) services sector. For both of these reasons, this joint venture looks like a smart tie-up for Lenovo as it starts to wean itself away from the lower-margin PC business and positions itself to potentially become an IT services specialist in the future.
Meantime, media are quoting Lenovo’s new senior vice president for Europe, Gianfranco Lanci, as saying that rumors that his company could make a bid for Nokia “must be a joke.” (English article; Chinese article) I personally like Lanci, who was one of the main forces behind the recent rise of Taiwan’s Acer (Taipei: 2353) before he left the company and joined Lenovo earlier this year.
But I also suspect that Lanci doesn’t truly understand Lenovo’s fondness for buying overseas assets, especially assets that are struggling. Lenovo’s past record not only includes its landmark purchase of IBM’s (NYSE: IBM) low-margin PC assets in 2005, but more recently also includes its purchase of similarly struggling PC businesses in Japan and Germany. The company is also frequently named as a potential bidder for other troubled assets, including HP’s PC unit when the company was thinking of selling that part of the business last year. (previous post)
I have no personal knowledge of the situation with Nokia, but in this case a Lenovo bid for the company would be completely consistent with its past behavior in similar situations. Accordingly, I wouldn’t be surprised at all if Lenovo is really thinking of making a bid for Nokia, even if Lanci thinks that such a move sounds like a joke. I completely agree with Lanci, and think that such a bid would undoubtedly be disastrous if Lenovo really decided to pursue the faded Finnish cellphone giant.
Bottom line: Lenovo’s new EMC tie-up looks like a smart move to strengthen its product portfolio, but a rumored bid for Nokia could be disastrous if it actually happens.
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