IBM and Lenovo New Leadership in Global PCs

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Transcript IBM and Lenovo New Leadership in Global PCs

IBM and Lenovo New Leadership in Global PCs

IBM and Lenovo Enter into Long-term Strategic Alliance

Create Powerful New Global Leader

December 8, 2004

Leading Products and Brands World Class Service & Support Global Reach New Growth Opportunities Scale

The New Lenovo: Overview

• $13B sales (last 12 months) • 19,000 employees • WW Headquarters: New York, USA • Principal operations: Raleigh, Beijing • Public company with ownership positions by Lenovo and IBM • Closing date: 2Q05 • Est. combined share data: 34% in China December 8, 2004 © 2004 IBM Corporation

Customer Value

Continued IBM Sales Coverage Innovative Products / Broader Portfolio World Class Service and Support 4 IBM Financing Global Business Partner Network Ease of Doing Business

Transaction Summary

“Today’s announcement further strengthens IBM’s focus on the enterprise, while creating a new global business that is better positioned to capture the opportunities in the PC industry going forward.” – Sam Palmisano

• Lenovo acquires IBM PC operations • IBM: ownership stake, long-term alliances with the new Lenovo in sales, services and financing

The new Lenovo Ownership IBM Lenovo Public Lenovo Holdings 45% IBM 36% 19% IBM Sales IBM Services IBM Financing The new Lenovo (Lenovo + IBM PC Business) IBM IT

Lenovo Group LTD

• • • • Founded 1984 FY04: Revenue, $3B; Net Profit, $135M Approx. 9,000 employees #1 market share in China for seven years (27% market share, source: IDC) • • • #1 PC company in Asia Pacific (excl. Japan) #1 IT company in China Small Business and Consumer market strength • Market capitalization: approx. $2.6B

Home Products

• Desktop PCs • Tianyi notebooks • Xuri notebooks • Inkjet printers

Commercial Products

• Desktops • Soleil notebooks • Scanners • Laser printers

Cell Phones Servers

IBM Personal Computing Division

• Established in 1981, creator of personal computer • $9B 2003 revenue; 10,000 employees in PCD and supporting operations • • #2 in WW commercial notebooks revenue • Undisputed leader in enterprise PC design, business productivity, and lowest total cost of ownership Enterprise and Mid-market strength (15% share total client) • Client, notebook and SMB double-digit growth, outpacing industry • ThinkPad notebooks have won over 1,000 industry awards • 100-million PCs shipped December 8, 2004 © 2004 IBM Corporation

Global PCs: Where are the opportunities?

IBM focuses on the Enterprise market. As a result, PCD revenue is weighted towards Large Enterprise/Mid-market customers. There is however, significant growth opportunity in the Small Business / Consumer market.

Segment Revenue Mix PC market growth opportunity of $16B* from 2004 – 2006 led by SB / Consumer 100% 80% SB / Consumer 43% SB / Consumer 71% 60% LE / MM SB / Consumer 40% LE / MM 57% 20% 0% LE / MM 29% Industry IBM

The New Lenovo: Leveraging strengths to pursue opportunities

Product Mix Segment

IBM % of Revenue Lenovo % of Revenue IBM % of Revenue Notebook 18% Desktop 40% Notebook 60% Desktop 82% SB / Consumer 43% LE / MM, 57% Lenovo % of Revenue LE / MM 17% SB / Consumer 83%

Geography

IBM % of Revenue Lenovo % of Revenue AP 32% EMEA 26% Americas 42% AP 100%

Global PCs: Where are the opportunities?

• Top six emerging countries will represent 39% of the 2004 – 2006 growth opportunity* • IBM is performing well on the premium product segments in these countries with the proper sales and distribution channels to reach these markets • The new Lenovo will have a broader product portfolio to capture this opportunity Source: International Planning & Research © 2004 IBM Corporation December 8, 2004

A Perfect Fit between Complementary Organizations

• •

Premium Global PC Brand

– Most recognized technology brand globally

Enterprise / Mid-Market Expertise

– Leader in business productivity and lowest total cost of ownership •

Notebook Leader

– Leading technology enhanced notebook product offering • •

#1 IT Brand in China

– Most recognized technology brand in China •

Consumer / Small Business Expertise

– Differentiated consumer/small business and extensive retail network

Efficient Operational Platform

– Low cost infrastructure and manufacturing scale •

Global Sales, Financing, Fulfillment and Service Network

Lenovo’s Chairman Yang

Yuanqing Yang

.. We at Lenovo understand that people are at the core of a successful company.

.. Our two companies also share a common vision to create an undisputed global leader in the PC industry. .. we’re both fully committed to success – success on the international stage, and success through producing the best PCs in the world for both enterprises and consumers. .. welcome to our family. I’m honored that you will be joining us and I hope that we’ll get to know each other a lot better in the years to come.

December 8, 2004

Synergy in Values

Dedication to every client’s success Innovation that matters – for our company and for the world Serving customers Innovative and “can do” spirit Accuracy and truth-seeking Trust and personal responsibility in all relationships Trustworthiness and integrity Customers Innovation Integrity

December 8, 2004

The New Lenovo Announcement HR Transition

Peter Haddad VP Human Resources, PSG

The New Lenovo Value Proposition

• The new Lenovo will offer an

exciting opportunity

to participate in a new and expanding business venture • The new Lenovo will offer an

attractive employment package

• Lenovo and IBM are committed to make this a

smooth transition

that minimizes personal disruptions and loss of work productivity

The transaction is expected to be completed no later than the second quarter 2005, and requires the approval of Lenovo’s shareholders and review by relevant regulatory organizations. It is the intention of IBM and Lenovo to reach and sign local agreements after completion of additional legal requirements and industrial relations processes where applicable in some countries outside the United States.

IBM Employees Joining the new Lenovo

• Employees who are part of PCD and their primary work responsibility is in support of the PCD mission/business • Employees in other business units whose primary work responsibility is in support of the PCD mission/business • Additional employees deemed necessary to meet the new Lenovo’s requirements may be selected based upon business need and an assessment of their current job responsibilities © 2004 IBM Corporation

December 8, 2004

Attractive Employee Compensation & Benefit Package* • The new Lenovo will provide total compensation and benefits that are comparable to IBM’s:

– – – – – Cash Compensation Same or Similar Job Responsibilities Comprehensive Benefit Plans Pension / Retirement Plan** Vacation

Certain countries, generally in EMEA, require that these compensation packages undergo further legal and industrial relations review before signing local agreements. Management plans to seek packages that are comparable in value to the package currently offered to employees in those countries in accordance with applicable laws.

**In Countries where these plans are offered today

Attractive Employee Compensation & Benefit Package*

(continued)

• Employee Health Benefit Package

– Immediate access for employee & dependents – no exclusions – Pre-existing conditions are covered – Credit for current year plan deductibles

• Years of service credit for:

– The new Lenovo Vacation Plan will be based on combined IBM and Lenovo years of service and will provide the same benefits as the IBM plan guidelines – IBM accrued and unused vacation transfers with you according to country legal standards – Other selected benefit programs (varies by geography) © 2004 IBM Corporation December 8, 2004

US Benefits: the new Lenovo

•

Pension Plans with comparable benefits and service credit for purposes of determining eligibility and vesting:

– IBM Personal Pension Plan (Prior DB Plan) – new Lenovo Pension Plan (DB) – – IBM Personal Pension Account (Cash Balance) – new Lenovo Defined Contribution Plan IBM Savings Plan – the new Lenovo 401(k) Plan •

Health benefits

– Continuous coverage – Medical – Dental •

Compensation

– Same base salary – Performance bonus targets maintained for one year – Similar incentive and sales commission plans • •

Vacation

– Same as IBM plan

More details

IBM / Lenovo Transition Schedule

20 December 8, 2004

Employee Announcement Meeting -

PCD Website published with new Lenovo specifics; to be updated regularly

December 8 – 9, 2004

Management Briefings

December 8 – 16, 2004

Employee Department Meetings

December 8, 2004 – January 7, 2005

In-scope certification process

First Quarter 2005

New Lenovo provides details of benefits offerings

Second Quarter 2005

Proposed IBM/Lenovo transaction closing Employees join the new Lenovo and transition based on final country closing dates December 8, 2004

Note: Dates represent anticipated transition plan and may vary based on transition progress

HR Summary

The new Lenovo will provide:

• Attractive Employment Package – Competitive compensation – Continuity of benefits • Smooth Employee Transition • Career Growth opportunities as we expand our markets • Recognition of innovation, performance and leadership • A chance to

run our own show!

IBM and Lenovo New Leadership in Global PCs

Transcript IBM and Lenovo New Leadership in Global PCs