Lenovo's latest disappointment

Posted by: Bruce Einhorn on November 9, 2006

More bad news for Lenovo. In a new setback for China’s leading PC maker, the company today reported that profits for the quarter ended September dropped 16%, to $38 million. That’s worse than the $40 million that analysts had been expecting. Back in August, when Lenovo reported its numbers for its fiscal-year first quarter, I wrote here that the company seemed finally to have gotten over the severe indigestion that came from Lenovo’s acquisition of the money-losing PC division of IBM. So much for that prediction.

In Lenovo’s defense, cutting costs is expensive in the short term. And the company has done the right thing by bringing in an experienced team of managers from Dell, led by current Lenovo CEO Bill Amelio. But Lenovo is just one of many companies from Greater China trying to establish its brand globally, and things aren’t going so well for them. There’s BenQ’s disastrous attempt to become a cellular phone brand through its acquisition of the Siemens handset business. TCL has tried to break into TVs and cell phones by making deals with French companies Thomson and Alcatel; those businesses have slid backwards ever since. Telecom equipment maker ZTE has been struggling even as it expands its businesses in the West and in the developing markets. I’m not saying that Lenovo is doomed. But the fact is, the company got big in China thanks to a big boost from the government, which was happy to have a local champion. Beyond the friendly confines of its home market, Lenovo is just another company. And a struggling one.

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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