(China's) Lenovo completes acquisition of IBM's personal computer business

http://www.mysanantonio.com/sharedcontent/APStories/stories/D89QGLQ00.html


Chinese computer maker Lenovo has completed its $1.75 billion purchase of IBM's personal computer division, creating the world's third-largest PC maker, the company said Sunday.

The deal — one of the biggest foreign acquisitions ever by a Chinese company — is expected to quadruple sales of Lenovo Group Ltd., already Asia's biggest computer maker, the company said earlier.

Lenovo Chairman Yang Yuanqing called the purchase of International Business Machines Corp.'s personal computer division an "historic event" for the company.

The U.S. Committee on Foreign Investment had convened to investigate any national security implications of the proposed acquisition after three members of the U.S. Congress raised questions about the sale, but a review cleared it in March.

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are just waiting until they become economically self-sufficient enough to call in their chits to the US. We've let the Chinese get away with all this over the last decade or so and all the time ignoring their human rights abuses not to mention the tragedy of Tibet.

containers I see so many of are Chinese.

We are going to have to stop shopping or do SOMETHING about the inbalance in trade!

Most people will not buy the American-made good at a higher price. Most people buy the cheapest thing that gets the job done. Cheap electronics are made in Asia because labor and tax costs are a lot lower there. I'm not saying it's right or wrong; it just is. I'm getting a little tired of seeing antiglobalization bumper stickers on foreign-made cars, too, as long as we're on the subject. What do you drive?

IBM has not been making money on PCs for a long, long time. What do you propose, that they keep losing money? In case you forgot, IBM was in serious financial difficulty before Gerstner changed their focus from hardware to services. Enough difficulty that many analysts thought they were headed for the rubbish heap. If IBM were to bankrupt, 300,000 jobs would disappear with it.

Also, as with Dell, Apple, HP, and nearly all the rest, IBM has been making its machines in Asia for a long time now. The purchase of the division by Lenovo merely recognized what has been fact for many years.

I like IBM. It's one of the few companies that still pours serious cash into basic research not connected to any current product. Google Thomas Watson Laboratory to see what I mean.

Peace.

Cheap electronics are made in Asia because labor and tax costs are a lot lower there.

Japan is the biggest source of electronics and their wages are higher than American wages. Electronics are mostly "assembled" in China but the critical components, materials, and machinery are likely to come from Japan. It is not just cheap labor that has driven electronics offshore, the US fell behind in production technology a while back.

Nice to discuss this with you.

As I see it, part of the problem in America has been a reluctance to invest as much as is needed in factory production technologies. This doesn't seem to hold for many of the high-technology companies, however...look at the manufacturing innovations wrought by Intel, Advanced Micro, TI, National Semi, Cisco, etc. These companies' plants are the best in the world at what they do.

I'm not sure if Japan remains the biggest source of electronics; perhaps that depends on a definition of biggest. They certainly face ferocious competition from Taiwan, South Korea, and China. South Korea actually leads Japan in a number of manufacturing technologies, for example, LCD screens. Japanese brands remain huge sellers, but the brand does not indicate the country of origin.

People buy the cheapest good that will do the job. Wal-Mart is all the proof you need. If a company has to pay its labor more than some other company pays, then it must see higher value (i.e., more productivity) than its competitor, or it will not be able to stay in business, because it won't be able to compete on price. When people get mad at companies moving production overseas, the emotion is understandable, but what is the alternative? Keep a plant open in the US, and then go bankrupt because no one buys your higher-priced goods? I don't know the answer here, I'm just pointing out the situation.

It seems to me that one reason for the disparity between Japanese and American manufacturing is that American manufacturing infrastructure has been compromised by the adversarial model of management-employee relationships, especially regarding work rules, and company-provided incentives for efficiency and productivity. Japanese manufacturers can afford to pay higher wages when each labor dollar buys more production from employees compared to, example, workers in Western Europe or North America. Employees and managers there are a lot more cognizant of their common interests and fates, and less apt to think of their employment as something they are owed. Management takes better care of its workers; workers take better care of their companies. There's a feeling that everyone is on the same team. I wish sometimes we could not only have that feeling more often in American manufacturing, but also in American politics.

I also think the average Japanese company employs smarter people, too, especially in the engineering and planning departments. When intelligence is applied to problems of design and manufacture, rather than to financial manipulation and shorter-term performance, good things happen.

These are my opinions.

Peace.

I agree with every statement you made, except that I will quibble about one point -- Japan remains the biggest source of electronics at least according to a recent METI report. A substantial portion of finished electronics still originates in Japan -- around 25%, but in the larger market of electronic components over 50% is made in Japan. In the smaller but in many ways even more crucial markets of electronics manufacturing equipment and materials for electronics the share is 50-60%. Remember that Japan's economy is larger than than the rest of East Asia combined, making these numbers very plausible when according to RAND and other sources 80% of the electronics industry is now in East Asia.

South Korea in particular offers the biggest challenge in certain fields such as LED's but even here, the last I heard, Japanese firms that manufacture in Taiwan are taking back market share.
Also, according to a South Korean commentary I saw one of the reasons that Japan runs substantial trade surpluses with South Korea is that South Korean auto and electronics firms are dependent on Japanese technology for their own manufacturing equipment (there are other reasons as well -- ex. the Japanese auto market is closed to South Korean imports).

The reason I belabor this point is that it is an existence proof that a wealthy economy can maintain a strong manufacturing base. The other big point is that to the extent Japan has given up market share in electronics, it hasn't been to the United States, but to its neighbors who have for the most part adapted the Japanese economic system.

I would appreciate any addtional insights you have to offer since you seem to be knowledgable on the subject. My information is from what I read and I am always eager to hear first hand accounts.

Until later.

... From IBM Sitting At My Right Elbow. The Problem With American Business Is That They Have Sold Their Ownership To Wall Street And Have Become Dogs That Have To Perform Tricks By Meeting The "Numbers" On A Quarter By Quarter Basis. Unfortunately The Rest Of The World Is Now Following Suit Which Will Ultimately Lead To Lower Pay, Fewer Benefits,
Little Or No Pensions, Etc. for All Workers Across The Globe. Instead of Upgrading Manufacturing Factories In This Country Or Providing Reasonable Pay Increases To The Employees, The Profits Now Have To Go To Stockholders That Demand Unreasonable Earnings Quarter After Quarter. To
Make The "Numbers" Companies Have Moved Their Facilities First To Mexico And Later To Asia And Eastern Europe. IBM Does Invest In Research Areas Such As Nanofabrication Technology that Is Important Now And In The Future For Electronics, Etc.
I Drive An Grand-Am And A Honda Accord, Both Assembled In America. The
Japanese And British Are Two Of The Largest Investors In America.
When I Make A Purchase, I Will Always Buy The American Made Product Over The Foreign Made Product, Even If It Costs More. Continuing To Buy The Foreign Made Products That Are Cheap Only Fuels The Continued Reduction In Jobs, Pay, Benefits, Pension, Etc. Then What Will We All Do ??????

company is having problems bringing in the cash is that they start selling off parts of their business.

When you can't raise money on the bond market and the banks think you're too risky an investment, and when existing shareholders refuse to see their shares watered down by another issue of stock, you have to sell off parts of your business to raise money to keep going.

Obviously, in other cases, a business might not like the margins on some parts of their business, and might not see it as part of their long term strategy (ie, they want to become a high profit margin software company, and they'll leave the small profit margin computer manufacturing business to someone else for whom the drag on profitability doesn't water down what would otherwise be a high-flying stock).

Does anyone want to do the footwork -- check IBM's 10-K, balance and cash flow statements, and check their bond rating -- to see if IBMs having problems raising money?

Way to go IBM.

Jobs based fascism is rooted and growing in U.S. soil. You think race issues are tough now?

they've been making most of IBM's PCs for a while now, and it just cuts out administrative expenses.

Now IBM just imports the same stuff they claimed to have been building, and nothing really changes. In case nobody's noticed, just about all PCs come from China or Taiwan now.

No big deal or watershed here-- just admitting what's been going on for years. The steady emergence of China as the world's manufacturing center.

Not that that's a good thing, but it's what's happening.

If foreign interests were to buy Dell for example that would raise some eyebrows, but those same eyebrowa are unmoved by the fact that Dell is essentially in the business of slapping together foreign made components. The general public does not understand where the value-added comes from in a product and simply assumes that the company with the brand name on the end product is the whole story.

essentially meaningless.

No one seemed to care much about Perkin-Elmer (who's Perkin-Elmer?) not finding a domestic buyer for its chip foundry business, or RCA being owned by the France's Groupe Bull. Or even Chrysler being bought by Daimler.

And, no one seems to care just what's inside those Gateway or Dell boxes. Or the IBM ones, for that matter.

But, IBM cuts to the chase and decides not to bother putting its name on the boxes it never built anyway, and just order them like any other outsourced commodities and all he world's going to hell.

Well, except for military shit, Europe and Asia are eating us alive in technological advances and we'd better get used to it because the stockholders just won't put up with all that money wasted on expensive manufacturing and R&D.

It looks like we are on the same page.

...is what you're saying?

Maybe, maybe not.

Look at it this way... IBM is one of the few companies who would outsource even upper management (and via the sale, the owners too) across the Pacific to a developing nation. People on DU half-sarcastically say Microsoft should outsource Bill Gates' job to India. This sale to Lenovo is a little bit like that.

I was not focusing on the nationality of the companies' leaders. The nationality of the company itself is of some importance not least because the home nation can exercise some control over the company's behavior making sure it acts in the national interest. That this is rarely done in the United States is our problem, other wealthy nations (Japan, Swtizerland, Germany, etc.) generally do a better job of making sure the interests of their corporations and the public are aligned, for example by making it more difficult to have layoffs.

... their shareholders largely lived in the same country where the company operated. At least until recently. That introduced a sort of accountability, especially since some of these countries had a policy of codetermination (the state becomes a major shareholder). I believe that corporate globalization is largely a way for shareholders and executives to escape the last vestiges of accountability.

smaller grassroots scale economies, artisanry, contracting with like minded communities, whatever skill or craftsmanship that makes something, anything, useful preferably, for sale. Making things that we, then, would not need to buy from China, and other locally produced goods and services.

This level of economy also appeals to Populists and to local food producers in our community. These are some of the folks we see at the River Market; their market is in a meadow near the Little Blue River (Louis and Clark wagon trail historical site).

Pardon my cheerleading, but I really do think developing local actions can help develop practical responses to big problems headed our way.

...but the idea that we can rely strictly on small artisans is romantic. A modern economy requires large institutions and economies of scale to function properly. To go to a small artisan model would mean a sacrifice of material well-being and an absence of new technological advancement. This may be a world that is possible or even desirable but there would be a lot of sacrifices.

My preference would be to prefer local and small where it makes sense -- food services, retail, etc and keep the large institutions working on the straight and narrow where it doesn't -- autos, electronics, airplanes, etc.

is complete without its complement in proportions appropriate to the time, place, and group environment. In other words, I agree. I make strong statements about individual alternatives because the balance is so hugely in favor of the corporate at this point it seems.

Though essentially, each of us is free to do whatever s/he is prepared to live with as whatever result(s) from that "freedom".

Corporate power has become too great and their interests (the interests of stockholders) are often at odds with the interests of the public as a whole, while small businesses that are rooted in the community have more incentive and inclination to do well by the community. Large businesses/corporations need the firm hand of government to keep them working for the community instead of just the stockholders, but with the current state of corporate control of government there is noone to keep them in line.

The stories some baby boomers could tell about how this all works itself in the real world would certainly show that you are right about this.

without the need for U.S. management...how long before they buy out or nationalize other foreign companies that have moved operations there for the cheap labor, etc.?

Remind me again why they need foreign management and exploitation of their work force.