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Lenovo Group Ltd., which this week said it would swap CEOs, wants to wield the power of the penny.
The PC maker, which acquired IBMs PC arm in May said Tuesday that it would replace its CEO, Steve Ward, with William Amelio, the former head of Dell Inc.s Asian operation, effective immediately.
Despite surprising many with what seemed like an abrupt move, Ward said Lenovo had planned to tap a different type of chief executive—an operations manager—following the initial phases of integrating IBMs PC business.
The company, now a distant third in worldwide market share, has said it aims to combine its Think brand and operational efficiencies in an effort to take one of the top two spots from rivals, Hewlett-Packard Co., the second largest PC maker or Dell Inc., the largest.
Recently, however, “We stepped back and said were not building this company any more in the sense of constructing a company that really had no corporate governance… really had nothing in place on an international scale. Its built,” Ward said in an interview with eWEEK. “Weve got to turn this into a regular operation.”
Achieving maximum operational efficiency has become do-or-die for PC makers, analysts said.
“The PC industry has become very, very cutthroat, and Lenovo recognizes that in order to succeed its got to be operationally excellent, and pennies are going to count,” said Leslie Fiering, an analyst with Gartner Inc.
“Gartner has been saying for some time that…theres going to be continued consolidation and the survivors are going to be the ones that have control of their costs, their logistics, their supply chain and their manufacturing.”
Thus the company chose Amelio, a supply chain expert who Ward said he personally requited, in a move not dissimilar to those made by its competitors.
HP, for one, tapped former NCR executive Mark Hurd as its chief executive. Gateway Inc., in another example, brought on Wayne Inouye, who famously turned around low-price maker eMachines Inc.
A PC makers supply chain involves everything from acquiring parts to building computers and shipping them to customers.
“An area we really need to drive is our supply chain,” Ward said. “That wasnt as strong as it could have been with the initial part of our [combined] business.”
Thus Amelio will have is work cut out for him as Lenovos CEO. The new Lenovo chief will have to continue the companys existing work on its supply chain—it said its goal is to cut $200 million from its costs—while also cutting across cultural lines, said Roger Kay, president of Endpoint Technologies Associates.
Ward, who ran IBMs PC Business prior to its sale to Lenovo, is credited with a lot of heavy lifting. He helped to push the merger through approval by the U.S. Government, doing the work of the New Lenovos initial integration—including establishing the companys strategy out of the gate to put its Think brands first and expand into small and midsize business and consumer PCs.
He did all this while helping to keep its largest customers onboard and guard its market share, analysts said.
But, “theres a piece of reality here,” Kay said. Ward “did a good job. But if you look at what wasnt happening…in some sense, theyve done a lot of it operationally, but they havent blended the companies.”
“I think theres a very long-term integration story that has to go on,” Kay added. “So if you have a guy thats based in Asia and knows whats up over there—knows the territory and hits it off with the staff, but hes also an American…he does begin to sound like the guy to move it forward.”
Lenovos next steps will include continuing a broad branding campaign it launched earlier this year. The company will also make a new foray into the SMB and so-called prosumer space, made up of consumers seeking professional-level equipment, Ward said.
“Youre going to see us drive the branding even harder,” he said. Also, “Youre going to see our product line expand.”
Lenovo will deliver its new line of Lenovo-brand computers via the distribution channel in the February timeframe coinciding with its sponsorship of the Winter Olympics in Torino, Italy, Ward indicated.
The machines are expected to be available in the United States and also in Europe in addition to other geographies and are expected to offer a mix of cost and productivity.
“The number one way that Lenovo competes is with the products, with innovation,” Ward said.
Ward, who will stay on as a consultant for an undetermined amount of time, aims to ultimately take another CEO job. Although he declined to provide specifics on what he said are more than one opportunity hes evaluating.
“Ive been working for the last two years building this thing, really architecting Lenovo [with the addition of the IBM PC business] even before we knew it would be Lenovo,” he said. Now, “Im going to go off and do what Ive done before.”
Despite Wards short stay at the helm, post acquisition, analysts said that the transition is unlikely to affect customers.
“I dont think its a customer [concern] issue,” said Chris Foster, analyst at Technology Business Research Inc., in Hampton, N.H.
Instead, Foster said, the company appears to be aiming to compete more effectively after shoring up its products and customer relationships immediately after purchasing IBMs PC arm.
Lenovo executives have made it clear they will “not dilute that brand or sacrifice quality in the United States or Europe,” Foster said.
“I dont think that the customer has to worry about that. If the brand slips, thatll be the number one indication that the company has serious problems.”
Editors Note: This story was updated to include information and comments from analysts.