Lenovo Kicked out of Hang Seng Index

September 15, 2006 at 11:27 pm (China, Companies)

Lenovo, world’s third largest PC maker and China’s biggest, was booted from Hong Kong Hang Seng Index on Sept. 11. This is really a shame to the company and even to China, which is a strong supporter behind Lenovo’s take-over of IBM PC division. The acquisition was explosive news. Unfortunately, it was an unwise company strategy. No one will doubt that as profits keep on shrinking, PC is a diminishing industry. Even Dell and HP has to consider reorganization and transformation. After touched and failed almost all the possible areas, Lenovo, boyish and plucky, managed to reach a historic decision to take over IBM PC division. Except for the high-profile world-wide news release, Lenovo set off a new round of nationalism among Chinese, although there are many from business and economic circle doubting the acquisition.

 

The take-over proved wrong, at least until now. Lenovo’s net profit margin in second quarter is a tiny 0.15 percent. Selling a PC for 1000 bucks Lenovo only earns 1 buck 50 cents. Even selling newspaper will earn more. And Lenovo is still planning to lower its price to wage a bloody battle with Dell. The loser is obvious: Lenovo. No nationalistic sentiment can save a dying company.

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2 Comments

  1. Lenovo Hunting for Brand Exposure, Using NBA « Random Blog said,

    […] From The Wall Street Journal, Lenovo is now scrambling to borrow exposure from NBA. Unfortunately, brand is not something that NBA can bring to Lenovo, brand is a long time accumulation of, most importantly, quality and reliability. Even if everybody hear about Lenovo, still few will buy Lenovo computers. Considering Lenovo’s dire profit margin, this marriage with NBA can only pull Lenovo to the red. […]

  2. pandu ari said,

    The acquisition was explosive news. Unfortunately, it was an unwise company strategy. No one will doubt that as profits keep on shrinking, PC is a diminishing industry. Even Dell and HP has to consider reorganization and transformation.

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