While leading Chinese PC maker Lenovo (HKEx: 992) focuses on its core computer business, its parent, Legend Holdings, seems intent on a strange diversification campaign in the run-up to its own IPO that could come in the next 3-4 years. That seems to be the message with the latest series of Chinese media reports that Legend sees long-term potential in both the agriculture (Chinese article) and bottled water (Chinese article) businesses. These latest initiatives come not long after Lenovo founder Liu Chuanzhi, who never seems content to focus on the PC business he co-founded more than 2 decades ago in Beijing, said his company will also explore possibilities in the hotel business. (previous post) I’ll give Liu credit for limiting these strange new initiatives to his parent company rather than putting them into the listed Lenovo, where they could hurt earnings and divert attention from the company’s core technology business. At the same time, however, these disparate new initiatives don’t seem particularly related to anything Liu has done before, and therefore I would seriously question how much they could contribute to Legend Holdings, which Liu has said on several occasions will seek a public listing as soon as 2014. I understand that Liu wants to differentiate Legend from Lenovo, as investors won’t have much reason to buy shares in the newly listed Legend if its business profile looks identical to the listed Lenovo. But rather than look to completely green fields like agriculture and hotels where it has little or no experience, Liu should focus on growing related areas of the company, such as its interesting Hony Capital unit, a venture capital style firm that focuses on financing for up-and-coming technology firms, or its recently formed gaming console business. Those offer a much better chance for synergies and success than these unrelated areas that may also have big growth prospects but will face uphill climbs due to Legend’s own lack of experience in the areas.
Bottom line: Diversification plans by Lenovo parent Legend Holdings into fields completely unrelated to its core tech business look misguided, with a big chance for failure.
Related postings 相关文章:
◙ Lenovo Lodges? Perhaps, Says Liu 联想进军酒店业？
◙ Lenovo Takes Backward Step With Compal JV 联想和仁宝合资建厂为倒退举动
◙ Huawei, Lenovo Look to Foreign Advisors in Westward Drive
