Q&A: Rory Read On Lenovo's New Look

Welcome to the new Lenovo. The computer maker's coming out party comes five years after the little-known Chinese company purchased IBM's PC division, a move that shocked the IT industry. Now Lenovo, the fourth largest computer maker in the world, is beginning to shed its image as "the company that bought IBM's ThinkPad" and reshape itself as an innovative manufacturer.

Channelweb.com spoke with Rory Read, Lenovo's president and COO, during CES to discuss Lenovo's exciting new product lines and how the company plans to do battle with competitors in 2010. Read was promoted to his current position in early 2009. A 23-year IBM veteran, Read formerly served as managing partner of the Global Industrial Sector of IBM's Business Consulting Services before joining Lenovo as senior vice president of operations in 2006.

Read was promoted to the newly created position of president and COO last February and is now the highest ranking non-Chinese executive at the company. And despite suffering layoffs earlier in the year, as well as the departure of its CEO William Amelio, Lenovo and Read are engineering a turnaround with new products, aggressive pricing and channel-heavy strategy. Read offers his views on a variety of topics, from netbook growth and new technology at CES to the secrets of making the IBM acquisition a success.

How was CES from your perspective?

The show itself has been really interesting. There's a lot of good stuff this year. And there's a lot of energy, too. In terms of Lenovo, we're very pleased with the results. I think the new ThinkPads [Edge] are doing really well so far, and I think the U1 and other products are going to be great for us. We've got a really nice bag of tricks here.

Speaking of the U1, there's obviously been a lot of growth in the netbook market. Are you concerned about netbook sales eating into traditional notebook revenue?

No, I'm not really concerned. Hell, I think the core notebook space is still the heart of the market. I think there are obviously some other segments that are doing really well, like netbooks. But I actually think the smartbook segment will make a real impact in the next three years, and the netbook will be swept away into other segments. Take the IdeaPad U1 for example; you can use it as a traditional mobile PC and then pop off the screen and use that as a 3G tablet. So I think they'll just start to blend into notebooks and smartbooks after a couple years.

So will mobile PCs continue to get smaller as netbooks and notebooks converge?

It's all about real estate. Notebooks and laptops have to keep getting thinner and lighter and more powerful. But smaller? No. I think people will still want to watch their HD videos and run big applications. You can't do a PowerPoint presentation on a BlackBerry. So are people going to carry around laptops? No, but I think they'll still carry full-size notebooks.

What's impressed you at the show this year?

There's been an explosion of new technology around 3G wireless. And 3G technology has really impressed me here at the show, whether it's smartphones or smartbooks or digital cameras. In particular, I think smartbooks have a lot of potential. And the next glimpse of where technology is going, I think, is the way data moves between devices and is shared. I think it's going to allow us to make better products that serve more needs. I think 3G connectivity is crucial, whether it's televisions or digital cameras or smartphones or notebooks. The fact that I can't get my e-books from one device to another doesn't make sense. Same with photos, videos and digital music. Things got out of control with Napster and digital music, but now we've swung too far in the other direction [with DRM restrictions]. I should be able to move my digital media from one device to another seamlessly, and I think that's going to start happening very soon.

Are you worried about there being too many mobile devices with notebooks, netbooks, e-readers, digital music players, smartphones and now smartbooks?

No, I'm not worried about that. Honestly, I think as long as we enable data to move seamlessly between all devices, then it's fine.

You've talked about your IdeaPad and ThinkPad PCs, but you've also got a lot of desktops here at the show, which I think has surprised some people who identify Lenovo with the notebook.

Well, let me start here: Don't you think the PC industry has been neglecting innovation over the last few years? I think desktops have been neglected the most. So we've tried to bring that innovation back, and I think the all-in-one desktop designs are positioning us for a rebirth in that area. Other manufacturers left the door open and we're now walking through with new products. All-in-one desktops have obviously been around for a while. It's nothing new. It's just a different take on the design with more computing power and new capabilities, like a touch screen or HD widescreen video.

You mentioned competing PC manufacturers. Acer's made a lot of noise lately, especially with its low price points. And it's worked because they've supplanted Dell. So how do you plan to compete with them going forward?

I want to meet Acer on both sides of the ball. And that means competing with them on quality and innovation as well as price. And Acer may meet us on price, because that's what they're good at. But then hit back with quality and innovation, and that's not their strength. So they hit us with a jab, and then we hit back with a right hook. I think we have a lineup right now, especially with our notebooks, that is extremely attractive for both the corporate customer and the consumer in terms of price and quality. I'll use an analogy. Do you use the plastic disposable razors or the real thing? Personally, I'll take the real razor over a cheap disposable any day; I want quality and longevity. And the channel is key, too. We're going to win with them. Channel partners are creating value with services and support not because it's what we want but because it's what the customer wants. And I think there's a huge opportunity here with these new products. I think the SMB market will be particularly big for the new ThinkPad Edge. Our channel business is 90 to 95 percent of our overall revenue, and it has to be.

What do you see happening this year for PC sales? Will there be a hardware refresh in 2010?

Yes, I think there's a corporate refresh coming in the next 6 months. There are a lot of customers looking at and testing new products. I think they're looking at improving productivity, particularly for mobile PCs, and they see the new chips from AMD and Intel as keys. And the chips are also at an attractive price. In fact, all of partners, I think, are going to have a great year, including Microsoft. We've already seen an improvement in business since Windows 7 arrived. So you have new components and software, and new designs and features for hardware. So yes, I think there's a very interesting refresh cycle on the horizon.

Last month was the five-year anniversary of IBM's sale of its PC business to Lenovo, which was a surprising move at the time. Looking back over the last five years, what were the keys to making the acquisition work?

I think the biggest key is that we maintained a strong relationship with IBM. That was really important. A big part of that was embracing the diversity. We valued it. And I think in the end, we found we were much more alike, East and West, Lenovo and IBM, than we initially thought. And as we went through the integration, we tried to focus on our core capabilities. We knew we couldn't assume this business alone and we needed IBM's help. We continued to invest in the existed product lines, but we also started to invest in new ideas and innovations. Remember, we've been working on these products for 18 months, and we were faced with hard choices during the recession. We had to make some tough decisions about our back office capabilities, but we decided to not sacrifice innovation. So all of these products we have now were in development during the teeth of the economic downturn. We could have panicked and walked away. But we didn't.