Lenovo's Global Gambit

George He hasn't gotten used to working with Americans. The chief technology officer of PC maker Lenovo has had to deal with a lot of them since the Chinese company acquired the computer-manufacturing business of U.S. giant IBM last year. On his monthly jaunts to Lenovo's new global headquarters in Raleigh, N.C., He, 43, complains there "aren't so many good Chinese restaurants." But he finds the cocktail parties that precede business dinners even harder to endure.

"We stand there and talk to each other," He says in disbelief. "That's just not our style, the Chinese people." He struggles through the chitchat about wine, college sports and other subjects he finds completely foreign. "Duke? North Carolina? I don't know what it is!" he says, throwing up his hands in frustration.

Catching up on college rivalries is the least of the challenges facing Lenovo's managers. Once little known outside China, Lenovo catapulted to No. 3 in the world PC market (after Dell and Hewlett-Packard) with its $1.75 billion IBM purchase. The acquisition, the most high-profile overseas grab by a Chinese firm, horrified many Americans, who saw a rising China set to gobble up flagship industries in the U.S. After all, IBM virtually invented the PC 25 years ago.

Yet there were sound reasons why Big Blue disgorged that trademark business--not least of which being that it was a lousy one. With its market share in retreat, the unit had lost nearly $1 billion in 3 1/2 years. Much of IBM's sales were in a slow-moving segment of the PC market--large shipments to major companies--and IBM hadn't fully tapped the more robust small-business and consumer markets. As a result, Lenovo's PC shipments have grown more slowly than the industry average for four of the past five quarters. That lopsided business, says William Amelio, Lenovo's CEO, makes him "feel like I'm hopping on one leg."

Amelio, 48, has a plan to plant Lenovo firmly on two feet. The former head of Dell's Asian operations, Amelio took the helm last December, and is launching an ambitious gambit to seize international market share by expanding into every nook of the PC industry. Lenovo is introducing new products, building a complex global-distribution network and splurging on a brand-building campaign. The strategy could turn Lenovo into a far fiercer rival for Dell and HP than stately IBM was, and threatens to intensify the cutthroat competition that is a hallmark of the famously bloodthirsty PC business. "I eat, drink, sleep PCs," promises Amelio. "There is nothing else in my world."

HP and Dell are in his world, and they have well-established sales networks, a full range of products and famous brand names, especially in the U.S. "We joke, 'Lenovo who?' The challenge is that Lenovo doesn't have a brand name in the U.S.," says Samir Bhavnani, director of research at tech-information provider Current Analysis in San Diego. Even worse, Lenovo is being buffeted by the some- times tense relations between the West and China. In May the U.S. State Department said 16,000 PCs it had purchased from Lenovo wouldn't be used for classified work after a Congressman claimed that the Chinese-made computers would threaten national security. Lenovo's chairman, Yang Yuanqing, insists his computers pose no security risk.