Lenovo's appetite is growing, spending $5.2 billion a week on mergers and acquisitions

Absrtact: Lenovo's appetite is growing, spending 5.2 billion of dollars a week in mergers and acquisitions. January 23, Lenovo Group (hkse:992) and IBM (NYSE:IBM) jointly announced that Lenovo plans to acquire IBM's x86 server business, including the system X,bladecenter and Flex system Blades

Lenovo's appetite is growing, costing 5.2 billion of dollars a week for mergers and acquisitions.

January 23, Lenovo Group (hkse:992) and IBM (NYSE:IBM) jointly announced that Lenovo plans to acquire IBM's x86 server business, including system X,bladecenter and Flex blade servers and switches, Flex Integrated system based on x86, NeXtScale and iDataPlex servers and related software, blade network and Operation dimension. The total transaction amount is about USD 2.3 billion, 2 billion dollars is paid in cash and the balance is paid by Lenovo stock.

January 30, Lenovo Group and also announced the acquisition of Google's Motorola Mobile smartphone business, the acquisition price of about 2.9 billion U.S. dollars, the acquisition of the completion of the payment of 1.41 billion U.S. dollars, including 660 million U.S. dollars in cash and 750 million U.S. dollars of Lenovo common stock payments, the remaining 1.5 billion U.S. dollars will be paid in three year promissory notes.

The question left by Lenovo is: Where does the takeover of the chariot of association sail?

After the two acquisitions were completed, Lenovo ranked the world's third in the global smartphone and X86 services sectors. "Like the acquisition of IBM's PCD business, Lenovo is not the world's third," said Lenovo's CEO and chairman, Yang, in an interview with the 21st century Economic report. Lenovo aims to be the world's first.

How long does it take from third to first? Yang thinks it will grow faster than the PC business. Lenovo bought IBM PCD after 10 years, Lenovo PC market share from the world's third jump to the world's first.

The reason for Yang is two points, one is after the integration of IBM PCD business, Lenovo Group has accumulated more extensive integration experience, the integration takes a shorter time; the second is the acquisition of IBM PCD is "Snake silkworm Elephant", and the above two acquisitions belong to "elephant swallow Snake", Lenovo Group business scale than the merger business scale is bigger.

The capital markets are not as optimistic about Lenovo's acquisition as Yang, which has fallen from 52 weeks to HK $8.41 since the company announced its acquisition of X86 servers. Capital Market to see the two rounds of mergers and acquisitions for two reasons, one is the risk of mergers and acquisitions, the second is expected to see Lenovo's internet thinking, such as software, IT services, cloud computing, the expansion of the hardware sector is not in line with market expectations.

The other side of the story is that if Lenovo is not in December 2004 to acquire the IBM PCD business, Lenovo and founder, the same side and other domestic PC manufacturers fell together, there will be no "international association" this big chess; Lenovo Group acquired IBM PCD no one bullish, the share price also fell to HK $1.32.

After a decade of recovery, Lenovo has turned a bad thing into something that everyone is not optimistic about. What is the secret to achieving all this? Yang is led by the management of the super strong executive power.

Acquisition of March

Yang revealed the data: After the merger, Lenovo Group in the Chinese server market will be ranked first, the market share of about 25%, the global server market ranked third, the market share of about 14%.

Statistics from IDC, a third-party data company, provided the 21st century Economic report that 2013 years ago in the three quarter of the Chinese market, Lenovo Group +IBM X86 Server Total market share of about 25.81%, about 22.08%, about 13.75%, three of the total market share of about 61.64%. Lenovo Group became the market first.

In the three quarter of 2013 years ago in the global market share, HP shipments accounted for about 32.05%, Dell accounted for about 27.28%, Lenovo +IBM X86 server accounted for 13.42%, about 3.52%,ODM about 14.27%.

Yang said Lenovo's smartphone business also ranked third in the world after the acquisition of Motorola. The latest data from third-party data companies show that Samsung ranked first in the global smartphone market in 2013, with a market share of about 32%; third, about 15%; Lenovo Group and Motorola Total 6%, ranked third in the world.

The title of PC King is no longer enough for Yang. Mergers and acquisitions of global markets, Lenovo in the field of smartphones and servers will be two dimensions of development, one is the internationalization of smartphone and server business, the second is to gain more market share, become the server, smartphone field of the world's first.

In internationalization, IBM, Moto brand, customer relationship, channel system, and technology and products will become Lenovo Group in the field of smartphone, server internationalization support. Lenovo how to do the global scale first, through the expansion of existing business, the second is through mergers and acquisitions to expand the scale.

December 2004, Lenovo Group merged IBM PCD Business, its global market share from 2.2% to 8%, become the world's third. Lenovo began its 7-year business integration, and, by 2011, Lenovo began driving the acquisition of vehicles, after just three years, from the world's third jump to the world's first.

January 27, 2011, Lenovo and Japan NEC PC set up a joint venture, Lenovo became the Japanese PC market No.1. June 1, Lenovo Group acquired the German medion company, after the merger Lenovo became the German market third, the European consumer sector market share expanded to 10%. September 5, 2012, Lenovo bought the Brazilian CCE company, the acquisition of Lenovo's share in Brazil nearly doubled, become the third market.

"Cloud + END" new strategy

The two rounds of acquisitions, Lenovo Group is a loss, or profit?

2004, Lenovo acquired the IBM PCD business, the business in 2003 to generate revenue of 9.566 billion U.S. dollars (Lenovo Group PC business revenue of about 2 billion U.S. dollars), the acquisition price is 1.77 billion U.S. dollars, merged into Lenovo Group staff of about 12,000 people; IBM X86 Server 2013 revenue of about 5 billion U.S. dollars, merged into Lenovo Group about 7500 people, the acquisition price of 2.3 billion U.S. dollars.

Earlier, Google bought Motorola Mobile price is 12.5 billion U.S. dollars, the same business, Lenovo Group's acquisition is 2.9 billion U.S. dollars, merged into Lenovo Group staff of 3500 people.

Revenue, the number of employees merged is not critical, the key is the integration of the business and the long-term strategy of the company is matching: If you can support the long-term strategy of the company to achieve business upgrades, can be called a successful acquisition.

Sun Yongjie, an independent IT analyst, believes that after the acquisition of the X86 server business, Lenovo has the strength to compete with HP, Dell and other X86-oriented manufacturers. For example, the Pure Flex fusion infrastructure (integration of servers, storage, networking, software, etc.) in the IBM X86 server business of mergers and acquisitions, with HP's Cloudsystem, VCE Alliance Vblock, NetApp Flexpod, Dell's Smart System ( Active System) is a direct competitive relationship.

As early as August 1, 2012, Lenovo and EMC announced plans to set up a joint venture in which EMC shares its Iomega, which will inject cash into the company. Lenovo has a 49% stake in the new company, and the new company will focus on providing NAS storage systems for small and medium-sized Enterprises and branch offices in 51%,EMC.

EMC is the world's first in storage services, and this collaboration has greatly enhanced Lenovo's position in industry-standard servers and networked storage solutions, making Lenovo a key competitor in the enterprise market.

September 18, 2012, Lenovo acquired the stoneware company in the United States to strengthen and expand its product organization's key components, namely cloud computing solutions, to enhance the ability to provide commercial and consumer cloud products.

As for Motorola's mobile phone acquisition, Mr Yang says 5 assets are brand, patent, technical strength, product line richness, key markets (such as the US market). Lenovo Mobile products are currently sold mainly in China, while Motorola is the global mobile terminal brand.

Lenovo business includes PC computing terminals (desktops + notebooks), mobile computing terminals (smartphones), Home computing terminals (smart TVs), Enterprise Computing (server), storage, software and cloud services. What is the structure of the future Lenovo business? is "cloud + END", not hardware scale.

"Cloud + End" is Yang's current plan for Lenovo, the 5.1 billion-dollar acquisition is meant to be.

To achieve this business purpose, Lenovo has just made an organizational adjustment. January 28, Lenovo announced that the back-end business group will be divided into four business groups, namely, the PC business group, Mobile Equipment business Group, Enterprise class business group, cloud services business group.

The PC business Group is headed by the incumbent, Lanci (formerly Acer Global President) of the European Middle East and Africa region (EMEA). Mobile business groups (including smartphones, tablets, smart TVs) are headed by Liu June, who is currently leading Lenovo's business group (consumer and mobile products); Enterprise Business Group ( including servers and storage), Gerry Smith, who is currently the leader of Americas, is responsible for the cloud services business group (including software and services) by the incumbent Lenovo Group's senior vice President, CTO He Zhiqiang.

In fact, through the two rounds of mergers and acquisitions, Lenovo has also pulled IBM, Google into its own biosphere. Some of the acquisitions were paid by Lenovo, so that IBM and Google became shareholders of the Lenovo Group. In the common interest, can for Lenovo Group to "Cloud + END" the development of the road to give limited support.

Executive force is the key

Through the two rounds of acquisitions, Motorola and IBM to Lenovo Group's "global Visa", the former for Lenovo mobile phone, the latter for Lenovo server, like the acquisition of IBM PCD in 2004, IBM became Lenovo PC "European and American visas."

Yang said Motorola has won the favor and long-term cooperation of a large number of mainstream operators around the world, in mature markets such as North America and Europe, Motorola and including Verizon, At&t, Sprint, T, U.s.cellular, And O2 and Vodafone, including the top operators have established a solid partnership.

With the acquisition of Motorola, it is also possible to quickly establish a partnership with top telecom operators, which will make it easier for Lenovo's smartphone products to enter the U.S. and European markets.

In the server industry, IBM in addition to the X86 server products, but also rely on the Power system product line (this part of the business will continue to remain), IBM face customers have a high reputation for stability.

"Global visa" and "global market" there is a distant distance, Lenovo how to cross?

Lenovo's ability is embodied in three aspects, one is the cost control capacity, that is, Liu often said "towel twist water", the second is to customer understanding and service capabilities; Each company has different capabilities, such as IBM, whose capabilities lie in the technology and leadership of the technology trend. Therefore, Lenovo's main business is the success of the mature product areas, while IBM is the technology innovation-led product area to achieve success.

Lenovo initially learned from HP's distribution model, digestion and absorption into a big Lenovo marketing ecology, and later by Yang summed up as "relational + trading business model." Lenovo's success in China's PC market is the practice of this model in China, and the acquisition of IBM's PC business after acquiring the global PC Laurel is the global practice of this model.

What is cost, operation and service? Depends on the executive force. Executive power is Lenovo's core competitiveness.

Lenovo former staff reported to the 21st century Economic report, Lenovo Group vice president of the report to Yang, the beginning of the plan when the forehead sweating, year-end summary when the legs tremble. As Lenovo's top executives, they have ambitions, a goal to impress their leaders, and an extra task at the end of the year to avoid the end of the elimination.

When Lenovo Group acquired IBM, Lenovo executives, including Liu, were hesitant about the prospect of Lenovo's acquisition of IBM's business: Can the snake swallow the elephant? Why did Lenovo succeed in acquiring IBM PCD and turning the global visa into a global market? The bottom line is executive power.