IBM charts PC future in wake of the Lenovo buyout

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What a difference a year has made for IBM's personal computer division. Last January, IBM readied its comeback effort in PCs with an aggressive advertising campaign, its first in five years. IBM VP-marketing and strategy for PCs, Deepak Advani, declared the campaign a success in an interview with Ad Age in October and described the future glowingly, saying IBM PC had "a lot of irons in the fire."

One of those irons, it turns out, was a buyout offer. Last month, the IBM division agreed to be acquired by Chinese computer maker Lenovo in a deal valued at $1.75 billion.

But that doesn't mean the IBM brand or its advertising will just disappear. The IBM PC brand will go on for up to five years, said Bob Galush, VP-product marketing for IBM's PC division. A new IBM PC campaign from WPP Group's Ogilvy & Mather is currently in the works, although he wouldn't offer specific details. IBM's ThinkPad notebooks, which have a fiercely loyal fan base, along with IBM's ThinkCentre "will continue forever," Mr. Galush said.

Over the next four months, IBM and Lenovo will hash out details of the final merger, which includes marketing strategy. However, Mr. Galush did offer some thoughts on what likely will happen. Two brands will probably emerge, IBM and Lenovo, with IBM continuing to be sold to its largely custom business user base, and the Lenovo brand sold to consumers. In China, the Lenovo brand will likely be sold as it currently is, through retail channels including some 4,000 Lenovo stores. However, there are no plans to re-enter the U.S. retail market, a venue IBM departed in 1999, with either brand, Mr. Galush said. He said the Lenovo brand would likely be sold to consumers in the U.S. in ways that would forgo the shelves of Best Buy and Circuit City.

Lenovo will cede management to IBM PC executives with Stephen Ward stepping into the role of CEO, and Lenovo's current CEO moving to a non-operational chairman role. IBM's Mr. Advani will become chief marketing officer of Lenovo, and Mr. Galush said he anticipates he'll reprise his current role, as will most of the IBM PC marketing staff. The new headquarters of Lenovo will be in Armonk, New York.

Product features will likely also cross between current IBM and Lenovo products, Mr. Galush said, citing examples such as the ThinkPad thumbprint security reader or its "airbag" technology which protects the notebook from damage if it falls. "Certainly elements of the products will very likely move to Lenovo products, like the airbag," Mr. Galush said.

The final deal will likely be a good case study in merging companies with vastly different cultures, with particular differences likely to be noted in marketing. While Lenovo has already signed on as a major sponsor of the 2008 Beijing Olympics in its home country, big marketing budgets are not the norm for Asian manufacturers.

"Asian companies believe in price and technology," said Roger Kay, IDC analyst. "The U.S. market runs on illusion. The Asian companies have a hard time with big marketing budgets that get spent on the Super Bowl or sponsoring other sporting events."

Yet in the end, Lenovo and IBM personal computers will probably succeed or fail on merit. "It all comes down to the ability to execute," branding consultant Joe Calloway said. "If they can execute as well as anyone else, then they'll probably do about as well as anyone else would."

Lenovo will become the third largest PC maker in the world, a position IBM occupied on and off for years without much movement upward against powerhouses Dell and Hewlett-Packard.

"The deal is a wash. That is, people generally don't care where technology comes from as long as it works," said Mr. Calloway. "The general reaction is probably just a shrug, and an `oh well, OK.' ... We all have such a global mentality now, people think it's fine for products to come from other places in the world, particularly technology products because it's generally accepted that there are great technology companies in Asia."

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