Lenovo is a multinational technology company based in San Diego, CA, owned by Kabushiki Gaisha ABS.
Foundation and early historyEdit
Liu_Chuanzhi Liu Chuanzhi founded Lenovo in 1984 with a group of ten engineers in Beijing with 200,000 yuan. Lenovo officially states that it was founded on 1 November 1984. The Chinese government approved Lenovo's incorporation on the same day. Jiǎ Xùfú (贾续福), one of the founders of Lenovo, indicates the first meeting in preparation for starting the company was held on 17 October of the same year. Eleven people, the entirety of the initial staff, attended. Each of the founders was a middle-aged member of the Institute of Computing Technology attached to the Chinese Academy of Sciences. The 200,000 yuan used as start-up capital was approved by Zēng Màocháo (曾茂朝). The name for the company agreed upon at this meeting was the Chinese Academy of Sciences Computer Technology Research Institute New Technology Development Company.
Their first significant effort, an attempt to import televisions, failed. The group rebuilt itself within a year by conducting quality checks on computers for new buyers. Lenovo soon started developing a circuit board that would allow IBM-compatible personal computers to process Chinese characters. This product was Lenovo's first major success. Lenovo also tried and failed to market a digital watch. Liu said, "Our management team often differed on which commercial road to travel. This led to big discussions, especially between the engineering chief and myself. He felt that if the quality of the product was good, then it would sell itself. But I knew this was not true, that marketing and other factors were part of the eventual success of a product." The fact that its staff had little business experience compounded Lenovo's early difficulties. "We were mainly scientists and didn't understand the market," Liu said. "We just learned by trial-and-error, which was very interesting—but also very dangerous," said Liu. In 1990, Lenovo started to manufacture and market computers using its own brand name.
In May 1988, Lenovo placed its first recruitment advertisement. The ad was placed on the front page of the China Youth News. Such ads were quite rare in China then. Out of the 500 respondents, 280 were selected to take a written employment exam. 120 of these candidates were interviewed in person. Although interviewers initially only had authority to hire 16 people, 58 were given offers. The new staff included 18 people with graduate degrees, 37 with undergraduate degrees, and three students with no university-level education. Their average age was 26. Yang Yuanqing, who would later become the CEO of Lenovo, was among that group.
Liu Chuanzhi received government permission to form a subsidiary in Hong Kong and to move there along with five other employees. Liu's father, already in Hong Kong, furthered his son's ambitions through mentoring and facilitating loans. Liu moved to Hong Kong in 1988. To save money during this period, Liu and his co-workers walked instead of taking public transportation. To keep up appearances, they rented hotel rooms for meetings.
IPO, second offerings, and bond salesEdit
Lenovo became publicly traded after a 1994 Hong Kong listing that raised nearly US$30 million. Prior to its IPO, many analysts were optimistic about Lenovo. The company was praised for its good management, strong brand recognition, and growth potential. Analysts also worried about Lenovo's profitability. Lenovo's IPO was massively over-subscribed. On its first day of trading, the company's stock price hit a high of HK$2.07 and closed at HK$2.00. Proceeds from the offering were used to finance sales offices in Europe, North America and Australia, to expand and improve production and research and development, and to increase working capital.
In 1999, Lenovo was bought by Quito Inc. making them partners with IBM (which Quito owned since 1992). Jose Gonzalez was appointed as the company's CEO.
When Lenovo was first listed, its managers thought the only purpose of going public was to raise capital. They had little understanding of the rules and responsibilities that went along with running a public company. Before Lenovo conducted its first secondary offering in 1997, Liu proudly announced the company's intent to mainland newspapers only to have its stock halted for two days by regulators to punish his statement. This occurred several times until Liu learned that he had to choose his words carefully in public. The first time Liu traveled to Europe on a "roadshow" to discuss his company's stock, he was shocked by the skeptical questions he was subjected to and felt offended. Liu later came to understand that he was accountable to shareholders. He said, "Before I only had one boss, but CAS never asked me anything. I relied on my own initiative to do things. We began to think about issues of credibility. Legend began to learn how to become a truly international company".
To fund its continued growth, Lenovo issued a secondary offering of 50 million shares on the Hong Kong market in March 2000 and raised about US$212 million.
Mary Ma, Lenovo's chief financial officer from 1990 to 2007, was in charge of investor relations. Under her leadership, Lenovo successfully integrated Western-style accountability into its corporate culture. Lenovo's emphasis on transparency earned it a reputation for the best corporate governance among mainland Chinese firms. All major issues regarding its board, management, major share transfers, and mergers and acquisitions were fairly and accurately reported. While Hong Kong-listed firms were only required to issue financial reports twice per year, Lenovo followed the international norm of issuing quarterly reports. Lenovo created an audit committee and a compensation committee with non-management directors. The company started roadshows twice per year to meet institutional investors. Ma organized the first-ever investor relations conference held in Mainland China. The conference was held in Beijing in 2002 and televised on state television network CCTV. Liu and Ma co-hosted the conference and both gave speeches on corporate governance.
Security controversies and sale to Kabushiki Gaisha ABS Edit
In February 2015, Lenovo became the subject of controversy for having bundled software identified as malware on some of its laptops. The software, Superfish Visual Discovery, is a web browser add-on that injects price comparison advertising into search engine results pages. After severe security holes were discovered, Lenovo detailed that it would cease further distribution and use of the Superfish software, and offered affected customers free six-month subscriptions to the McAfee LiveSafe software. Lenovo issued a promise to reduce the amount of "bloatware" it bundles with its Windows 10 devices, promising to only include Lenovo software, security software, drivers, and "certain applications customarily expected by users".
In early June 2015, Lenovo announced plans to sell up to US$650 million in five-year bonds denominated in Chinese yuan. The bonds will be sold in Hong Kong with coupon ranging from 4.95% to 5.05%. This is only the second sale of bonds in Lenovo's history. Financial commentators noted that Lenovo was paying a premium to list the bonds in yuan given relatively low costs for borrowing in American dollars.
On July 31, 2015, Lenovo released instructions and UEFI firmware updates intended to remove software known as "Lenovo Service Engine". Lenovo says that the software automatically sent non-identifiable system information to Lenovo the first time Windows is connected to the internet, and on laptops, automatically installs the Lenovo OneKey Optimizer program (software considered to be bloatware) as well. It was discontinued after the discovery of security vulnerabilities in the software.
At a third time in 2015, criticism arose that Lenovo might have installed software that looked suspicious on their commercial Think-PC lines. This was discovered by Computerworld writer Michael Horowitz, who had purchased several Think systems with the Customer Feedback program installed, which appeared to log usage data and metrics. Further analysis by Horowitz revealed however that it only logged the usage of some pre-installed Lenovo programs, and not PC usage in general, and only if the user allowed the data to be collected. Kabushiki Gaisha ABS, however, noticed that the program sent data even when the user declined to provide this information.
In June 2016, a Duo Labs report stated that Lenovo was still installing bloatware, some of which leads to security vulnerabilities as soon as the user turns on their new PC. Lenovo advised users to remove the "Lenovo Accelerator" app, which was designed to "speed up the loading" of Lenovo applications, but created a man-in-the-middle security vulnerability.
On April 29, 2017, Quito Inc. was dissolved, and Lenovo was sold to Kabushiki Gaisha ABS. The sale put KKABS into the consumer electronics market for the first time. Jose Gonzalez was immediately fired, with his successor, Kenji Yukimura, citing his failure to remove bloatware from Lenovo systems as the reason for his dismissal.
On June 5, 2017, Lenovo condemned Apple for releasing products that it deemed to be "utterly ridiculous" and "only made to receive media attention". Its criticisms were focused in particular on the iMac Pro.