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 user 2006-11-21 at 11:49:00 am Views: 68
  • #17148

    Rumoured Lenovo acquisition of Lexmark would make sense
    speculation continues to swirl about PC maker Lenovo Inc., which is
    rumoured to be close to making an offer to acquire printer manufacturer
    Lexmark Inc.

    the deal were in fact to go down, IT analysts said it could prove to
    have significant impacts on Lenovo rivals Dell and Hewlett-Packard, and
    the channel at large.Warren Shiau, associate partner and senior IT
    analyst for The Strategic Counsel, said on the face of it, it could
    make sense for Lenovo to acquire Lexmark provided Lenovo could buy
    Lexmark for a price that makes sense with regards to the savings Lenovo
    could get by bringing printer production in-house.”It would also be a
    way to make money off a competitor, at least until Dell decided to move
    its production elsewhere,” he said. “The shared heritage Lenovo and
    Lexmark have might have some points branding wise, but it probably
    wouldn’t affect a decision to acquire or not other than that unless
    there are some shared processes, suppliers, organizational traits,
    etc., from the past that are still lingering.”

    According to Martin Kariithi, analyst for Technology Business Research Inc., it seems very likely Lenovo would acquire Lexmark.
    printer business is very small coming in at less that 1 percent of
    total revenue. Lenovo would like to diversify its revenue stream on
    products that are complementary to its PCs and give it a better shot at
    market lead HP,” he said. “Furthermore, both companies rely on the
    channel which would make it easy to integrate their sales
    operations.”Lenovo reported sales of (US) $3.7 billion representing a
    1.3 percent growth rate while the company’s net income fell to $38.09
    million compared to $45.2 million a year ago.Citing TBR’s latest
    quarterly report on Lenovo, Kariithi said the PC maker continues to
    dominate its core market in China but it has yet to prove it can
    compete effectively on the international market. Despite aggressive
    co-marketing and brand promotion activities such as the deal signed
    with the National Basketball Association, Lenovo has yet to gain
    widespread brand recognition in the U.S. and European markets.”Lenovo
    appears to buckling under competitive pressures and is struggling to
    keep up with leading PC vendor HP’s resurgence and aggressive SMB
    expansion. The company also has to contend with fourth largest global
    PC vendor Acer heavily breathing down Lenovo’s neck with the goal of
    snatching away the number three spot,” Kariithi said. “This is putting
    a strain on Lenovo’s margins forcing the company to price ThinkPad
    products at lower price bands.”Thus undermining Dell would be an added
    benefit, but Kariithi said Lenovo’s primary target is HP right
    now.”Both are channel oriented and Lenovo wants to expand in the SMB
    market in a big way and HP has a stronger foothold in this niche right
    now,” he said. “The acquisition would increase Lenovo channel
    commitment, giving the company more leverage in negotiations with
    channel partners.”Lenovo’s inventory management continues to face
    difficulties despite the company’s efforts to upgrade its supply chain
    management IT system. Lenovo’s distribution efficiency in the former
    IBM PC markets still lags behind its core market China. This raises the
    company’s cost structure and is hampering profitability in the regions
    outside of China, the TBR report stated.

    The acquisition rumors have been circulating for a while, noted Michelle Warren, senior IT analyst for Partner Research Corp.

    many cases, the marriage between the two companies makes perfect sense.
    Both are channel-friendly organizations, and they have complimentary
    product lines. They also share the IBM heritage,” she said. “But I
    think more important than sharing a heritage are the future
    possibilities that this union could potentially produce — including a
    great market for Lexmark (building upon the Lenovo presence in China
    and increasing its retail presence its brand awareness).”On the subject
    of IBM, Kariithi said Lenovo would prefer to move away from Big Blue’s
    culture. On the other hand, Lenovo has poached five former Dell
    APAC-China executives. That would certainly lend credence to the
    speculation that Lenovo is also gunning for Dell, he added.PRC’s Warren
    said Lenovo acquiring Lexmark would be a move in line with Lenovo’s
    transactional go-to-market strategy, while the supplies side would
    speak to its relationship strategy.”In this tightly competitive market,
    I wouldn’t be surprised at all to see Lexmark and Lenovo join forces to
    increase their brand competitiveness against both HP and Dell,” Warren
    added.When asked about the potential acquisition, Barbara Leary,
    director, corporate communications, for Lexmark International, said,
    “Lexmark does not comment on rumors.”