Olympic-sized Risk for Lenovo |
http://www.sina.com.cn 2004/03/30 16:35 Shanghai Daily |
It is a gamble for Lenovo Group to become a global sponsor of the Olympic Games. China's largest information technology company, originally called Legend, last Friday signed a contract with the International Olympic Committee to become the 11th member of The Olympic Partner Program. Under the four-year deal, the Beijing-based company will become the sole supplier of desktops, laptops, servers, printers and other computing equipment to the 2006 Turin Winter Olympics and the 2008 Beijing Olympics. The company will also be the exclusive IT equipment supplier to more than 200 national Olympic committees around the world from 2005 to 2008. It sounds great, as Lenovo becomes the first Chinese company to stand shoulder to shoulder with the likes of McDonald's, Coca-Cola and Visa to be part of the most important global sports event - the Olympics. But the deal is far less attractive than it looks. Since the TOP program puts each sponsor into a clear-cut designated product category, Lenovo won't be able to stick the Olympic logo on its mobile phones, as Samsung is the wireless communication equipment sponsor. Neither can it promote its digital entertainment products in Olympic arenas because that is the turf of Matsushita Electric Industrial Co Ltd. Even more fatal to an information technology company, Lenovo isn't the information service provider to Olympic events and members. Paris-based Atos Origin SA has been the exclusive provider since the Barcelona Olympics in 1992. These limits have kept Lenovo away from three much more profitable business sectors than the current one it has earned through the deal, although the company might have paid a handsome price. Having said this, it is necessary to point out the gamble is a worthwhile risk. Lenovo needs a new challenge to revamp the company's business growth model. Since 2001, the company's revenue has been growing yearly by a single digit, while profits have slid. Its 2004 financial report is due next month. But there won't be a surprise. From April to December last year, the company posted a pre-tax profit of 841 million Hong Kong dollars (US$107.8 million), down 1.06 percent from the year before. Advancing to the international market has been Lenovo's long-term, and also long-awaited, strategy. Lenovo has been China's largest computer supplier since the mid 1990's and harnessing the domestic market alone isn't enough to propel further growth. By sponsoring the Olympics, with its members in some 200 countries and regions and two global sports events, Lenovo now has the chance to jump-start its global growth plans. |
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