IBM and Lenovo — Q&A for customers

Q1. What did IBM announce?

We announced an agreement with Lenovo that creates a powerful new leader in the PC industry. Lenovo will acquire IBM’s Personal Computing Division and create a new company that will bring the strengths of IBM’s legendary PC business together with those of Lenovo, that will employ 19,000 people and provide the widest range of PC products and technologies to businesses, worldwide.

The agreement includes a broad-based, strategic marketing alliance under which Lenovo will receive sales and marketing support from IBM, and Lenovo’s products will be integrated into IBM Global Services offerings.

Important for all customers of IBM to know: IBM will provide warranty service and support and financing and leasing options for PC products from the new Lenovo. IBM will take an ownership stake of 18.9 percent in Lenovo, and it will purchase PCs for its own employees from Lenovo as well.

With this agreement, Lenovo becomes the world’s third-largest PC company and a key, strategic IBM business partner. Lenovo will have all of the strengths of IBM’s existing PC division, including research, development, design, and manufacturing capabilities.

Q2. What changes for me, the customer?

Before the transaction closes in the second quarter of 2005, nothing changes. And after the transaction closes, your experience as an IBM customer should be the same. Your IBM sales teams should include the same PC specialists, only they will be Lenovo specialists who will continue working closely together with their IBM colleagues. IBM customers will still have access to the world’s finest PCs, integrated into end-to-end, on demand solutions. And IBM has contracted to support the new Lenovo with the PC service support, and financing -- and the long-term relationships you expect.

Over the longer term, the advantages for our customers are clear. As separate entities, IBM’s PC division and Lenovo had outstanding development, manufacturing, marketing, and customer-care capabilities. Together, IBM’s PC Division and Lenovo form a new global enterprise that’s strategically focused on the PC market. IBM will have a powerful new business partner to take the value we can deliver through PC products and services to the next level of excellence. With this new ally, IBM will continue to provide a full range of industry-leading technologies to deliver value to our customers and help them address the toughest business challenges.

Q3. Can you tell me more about Lenovo?

Lenovo, which is listed on the Hong Kong stock exchange, is one of China’s largest companies. Created in 1984, Lenovo was the first to introduce the concept of home computers in China. Since 1997 it has been the leading PC brand in China and across Asia, with annual revenues of approximately $3 billion. Lenovo is principally engaged in the manufacture and sale of branded personal computers and handheld devices. With this agreement, Lenovo achieves a size that would have put it into the top five of Fortune Magazine’s annual computer industry ranking.

Q4. When will the transaction be completed?

The agreement will be finalized as soon as is practical, and is targeted to be finalized no later than the second quarter of 2005.

It requires the approval of Lenovo’s shareholders, and there will also be regulatory reviews.

Q5. Why is IBM making this change?

Our PC business has made tremendous progress over the past several years and extended our market leadership in our targeted business segments.

To build on that success, IBM’s PC division, as part of Lenovo, will be able to compete in all areas of the PC marketplace. The combined company will gain advantages neither PC operation could have on its own, and be a powerful global leader in the $180-billion global PC business.

Working together, IBM and Lenovo will be able to provide excellent value in PCs for companies of all sizes, with the same research and development, quality manufacturing, sales, service, support, financing, and long-term relationships our IBM PC customers have today.

Q6. Will the new Lenovo’s products carry the IBM logo and established IBM names like ThinkPad and ThinkCentre?

The new Lenovo’s products will continue to use the ThinkPad mobile and ThinkCentre desktop names, as well as the IBM logo.

Q7. Where will Lenovo personal computing products be manufactured?

As with IBM PCs today, Lenovo major manufacturing operations will include locations in China and elsewhere in Asia.

IBM PC research and development facilities in Yamato, Japan and design center in Raleigh, N.C., U.S.A., will also become part of Lenovo. Those resources will give Lenovo IBM’s award-winning design and development expertise in notebook and desktop PCs.

Q8. I have a good relationship with my IBM PC rep. today. Will I be working with a different person in the future?

Before the transaction closes in early 2005, of course current IBM teams will continue to work with you as always. After the transaction closes, you should see little change in terms of the people you work with for PC products and services. The PC sales force for the new Lenovo will continue to be integrated into IBM’s sales process, so you’ll still be working with the same team. In most cases, we expect that the PC specialists you work with today will be the same people supporting you as part of the integrated IBM/new Lenovo team.

Q9. Will the Lenovo remain committed to the same product roadmap?

There will be no changes to the current roadmap for products. The ThinkPad mobile and ThinkCentre desktop brand names remain the same, and the PCs will continue to bear the IBM name and logo for up to 5 years. The same team that does research, design, and development of IBM PCs today will be doing so for Lenovo, and IBM-branded PCs will continue to offer the highest quality matched by both the lowest cost of ownership and the highest return on investment.

Over time, the best of the IBM and Lenovo product lines will be combined into the Lenovo lineup of industry-leading PC products and services.

Q10. What does this mean for PC service and support?

Nothing changes with regard to the level of service, support, or warranty for the IBM PC’s you already have. For investments in ThinkPad mobile and ThinkCentre desktop PCs made after the transaction closes, IBM has an agreement in place to provide warranty service and support for up to five years. Current and future investments in ThinkPad mobile and ThinkCentre desktop PCs are backed by IBM’s warranty service and support.

Q11. Will this change affect my pricing?

IBM PCs provide the lowest cost of ownership and the highest return on investment. Lenovo has indicated that it intends to continue to offer these advantages.

Q12. If my contract transfers from IBM to the new Lenovo, will any of my terms and conditions change?

No. When the transaction is completed, the new Lenovo will assume all obligations under existing IBM contracts that transfer.

Q13. Will this affect supply or delivery?

As we work to complete the transaction, both parties are committed to maintaining the highest levels of service and supply. We do not expect supply or delivery to be adversely affected.

Q14. I’ve been hearing from your competitors already. They are saying I should switch to their PCs because of the uncertainties raised by this agreement. Can I be assured I will continue to get the best value for my money in PC investments with IBM and Lenovo?

If you’re hearing from Dell and HP, it’s likely because these PC suppliers are worried. Lenovo will be a strong new competitor for them both in the global PC market, combining all the advantages of IBM and Lenovo’s existing PC businesses into a new company.

The product roadmap is clear – it follows IBM’s current roadmap for 18 months, and then will take the best of both IBM’s and Lenovo’s products as it continues to evolve and develop new technologies. IBM will continue to provide warranty service and support and financing and leasing options as we do today for up to five years. And IBM’s customer teams will continue to offer Lenovo PCs as part of our overall solutions to help you apply technology and services to help meet your toughest business challenges.

So you can rest assured that Lenovo will continue the progress that IBM PCs have made: developing innovative personal computing technologies that provide the lowest cost of ownership and the highest return on investment in the industry.

The alliance agreement between IBM and Lenovo is clear, and the path to PC success with Lenovo is clear, so the only uncertainties in the marketplace would be how Lenovo will impact the market share of some of its PC competitors. If you have any questions about this agreement or Lenovo, please let your IBM representatives know and we will be happy to clarify.

Q15. What happens after the five-year agreements between IBM and the new Lenovo expire?

Five years in the technology industry amounts to two or three generations of technology, and a few PC “refresh” cycles. While we cannot speculate on business arrangements that may or may not be made in the future, customers should feel confident in continuing to invest in IBM-branded PCs.

As a new global competitor in the PC industry, the new Lenovo adds new scale and market reach to the advantages IBM and Lenovo had with their separate PC divisions. Lenovo represents an even better long-term option for customers looking for the best value in PC products and services.

IBM has long-established relationships with customers, and we remain dedicated to every customer’s success. We are confident that our close alliance with the new Lenovo represents not only the best option for our customers’ PC needs, but also the best overall solution for IBM to continue to help our customers achieve their business goals.

Q16. Are workstations, Intel-based servers, or any other hardware part of the announcement?

No other IBM products will be part of the new Lenovo. This announcement is specific to personal computers.

IBM continues our strategy of focusing on business and the enterprise in the on demand era, leveraging our strategic, leadership positions in systems, software, and services. We expect that working together, IBM and the new Lenovo will be able to continue to provide our customers with even greater value in PCs as part of that strategy.