What IBM Must Do To Ensure Success of Lenovo Deal

This complex, five-year pact to transfer IBM's notebook and desktop operations (including patents and people) to Lenovo boils down to one thing: chairman and CEO Sam Palmisano's desire to vest IBM of an operation that was no longer a priority and marginally profitable at best. IBM, which will have a 19 percent stake in the new company, says it will take at least three months for the deal to close, but between now and then it is crucial for a number of events and moves to transpire to ensure the success of the ThinkPad product line and to maintain the loyalty of the business partners who sell those products.

So let's put some of the speculation and colorful backdrop of this story aside for a moment and look at several moves that IBM must make quickly

• Name a channel chief for the IBM/Lenovo operation immediately. There are a number of great candidates for this position, and IBM is already conducting interviews with internal candidates, but it cannot delay this move. Of course, industry insiders would like to see IBM channel veteran Frank Vitagliano assume this role, but it was unclear at deadline who would take over the position, which would report into worldwide sales executive Ravi Marwaha. Under IBM's current structure, executives responsible for setting partner strategy and managing channels are in the worldwide partner organization headed by Donn Atkins.
• Communicate with the leading channel executives so they clearly understand the strategy. On Thursday, Dec. 9, the heads of the major channel organizations -- Ingram Micro, Tech Data, CDW, Synnex and Avnet, among others -- gathered for a major investor conference sponsored by Raymond James and Associates. None of the CEOs, including such industry moguls as Steve Raymund and Kent Foster, who are IBM's largest partners, could offer much insight into the IBM sale and what it would mean for their businesses. It was not comforting to investors or journalists asking questions of these executives that their answers were based on what has appeared in newspaper and Web site reports. You could plainly see they wanted to understand the ramifications of this deal in greater detail so they could offer more insight to inquisitive customers.
• Head Dell, not to mention HP, off at the pass, as the old saying goes. The one individual who could clearly explain the impact of the deal to customers was Dell CFO Jim Schneider. "Companies that have merged have lost market share. I doubt this will be any different. It gives us another opportunity," he said at the Raymond James conference. Schneider's comments on IBM-Lenovo came after he spoke about Dell's ability to outpace industry growth rates and its continued pressure on HP and IBM in the PC space and in other segments. IBM better not let Dell or HP get out in front of the merger and portray it as the dumping of a business unit no longer strategic to the company. After all, Lenovo's shares sank this week as investors turned negative on the deal. Lenovo shares trade on the Hong Kong exchange for around 33 cents.
• Unleash the energy building inside PCD in blitzkrieg fashion. Fran O'Sullivan, PCD's COO, joined that business unit in April 1983. During her tenure, she has witnessed massive changes -- from financial hardship to rapid executive turnover to a totally repositioning of the personal computing operations. In a telephone interview, she said she has never been as "excited or optimistic" about a business decision as she has about this move. That may sound like some kind of corporate spin, but it is not. PCD has had to fight and scrape for every investment dollar it could get from IBM corporate, often standing behind much more profitable and growing divisions including services, servers and software. O'Sullivan believes the sale will unleash years of bottled-up creativity. IBM needs to do this with road shows, Webcasts, advertising, guerrilla marketing, interviews and methods befitting a hungry, nimble, agile operation. O'Sullivan said the PCD group is finishing up one of its best years. Did you know that? I am sure not many people do.
• Ditch the value vs. volume spiel. I am not saying to throw out the baby with the bath water, but the one question everyone wants answered is whether the new operation will continue to fund the types of innovations that are now the hallmark of a ThinkPad. Well, IBM's pitch may have made sense at one time, but it doesn't stack up well against Dell or HP today. IBM-Lenovo needs to assure the market it will invest in innovations for particular market segments, but that its play moving forward is to expand its product line and channels.
• Get solution-provider case studies into the market faster than Jason Giambi can change steroid stories. I am not joking here. I recently visited VARBusiness 500 CEO Bob Venero of FutureTech, who said he switched a large corporate account from Dell to IBM's ThinkPads based on the product's sturdiness and reliability. Venero did an amazing demonstration, taking his (and thank goodness not my) ThinkPad and jumping on it. It resumed normal operations moments after he picked it off the floor. Venero has also been known to pour a cup of coffee on the ThinkPad's sealed keyboard to the gasps of many. No damage occurred. He has even smashed a Dell notebook to pieces, then took swings at a ThinkPad, which suffered little damage. Better yet, GTSI CEO Dendy Young said recently that Dell's notebooks had such a high failure rate that his firm was selling other brands to its government accounts, especially when those customers needed a system capable of withstanding harsh treatment and elements.
• Let me know what you think about the deal at [email protected].