Bottom line: Lenovo’s new fund raising and roll-out of a retro commemorative ThinkPad 25th anniversary model show the company is focused on short-term fixes rather than the shock therapy it really needs.
With the October 1 Golden Week holiday now in the rear view mirror, we’ll jump back into the latest tech trends with a look at PC giant Lenovo (HKEx: 992), which was in a couple of headlines over the holiday that underscore its ongoing difficulties. The first of those has the company raising $500 million from a group of its core supporters, who are probably the only ones who have faith that this former superstar can right its sinking ship.
The other has the company rolling out a line of retro computers to celebrate the 25th anniversary of its ThinkPad computers, which arguably launched Lenovo on its trajectory that would ultimately take it to the top of the global PC hill. The only problem is that it’s difficult to stay king of the hill for too long in today’s cut-throat high-tech world, and also there’s the fact that PCs aren’t exactly the cutting-edge product they used to be.
We’ll begin our back-to-work Lenovo roundup with the $500 million fund-raising, which is the more substantive of the two stories. The actual amount of funds being raised is HK$3.9 billion ($500 million), which Lenovo is doing by issuing 906 million new shares to a joint venture created by its parent, Legend Holdings (HKEx: 3396) and its senior management, including Chairman Yang Yuanqing. (English article)
The group is paying HK$4.31 per share, which is right around where the stock is trading now. It initially jumped a little higher than that right after the news came out, but has since come back down to its current levels. That’s not too surprising, as there’s not a whole lot to get excited about with this company these days. The fact that it needs this cash also isn’t too surprising, as its business hasn’t exactly been all that great these days. It’s PC sales are basically flat, and its smartphone business that was supposed to be the next big thing is a non-player in the space.
The fact that it needs this money could be slightly disconcerting, as it obviously can’t go on in this muddled state for too much longer. Legend Group certainly has plenty of money to add to the pot, and could theoretically keep propping up Lenovo for a while to come. But at some point the company’s board is going to have to sit back and take a deeper look at Lenovo’s woes and consider some strong action. I’ve long said Lenovo is in need of some fresh leadership and that Yang Yuanqing should step down, though he remains at the helm of the company to date and was one of the latest investors.
Next there’s the ThinkPad news, which really is probably more symbolic than anything else. That news has Lenovo rolling out a 25th anniversary edition for its ThinkPad series, which it acquired from IBM (NYSE: IBM) with its landmark purchase of IBM’s PC business in 2005. (English article) It’s hard to believe that the ThinkPad is that old, but it really has been 25 years since IBM rolled it out way back in 1992.
The new commemorative model has a few retro features, including a backlit seven-row classic keyboard, dedicated volume buttons and multiple status LEDs. I imagine it will appeal to some ThinkPad historians and the biggest fans of the line, but that’s probably about all that Lenovo can hope to get from this launch.
At the end of the day, Lenovo needs to try and be a bit more forward looking and not just rest on its laurels from the glory days when it was the world’s biggest PC maker. Of course the company is trying to do just that, and I can remember a time not too long ago when Yang Yuanqing was saying how Samsung (Seoul: 005930) and Apple (Nasdaq: AAPL) would be his next targets after taking the top PC spot from HP (NYSE: HPQ). But you don’t hear that kind of talk anymore, and this latest breed of new fund-raising and nostalgia can’t hide the fact that Lenovo is really a company in need of some major shock therapy.