Computer maker courts U.S. consumers

Lenovo is hardly a household name in this country.

But China's largest computer maker is counting on its sponsorship of sporting events such as the NBA playoffs and Winter Olympics, coupled with partnerships with retail chains such as Best Buy and Circuit City, to turn it into a well-known U.S. brand.

The Morrisville-based company trails far behind rivals Hewlett-Packard, Dell and others in selling laptops and PCs to businesses and consumers in the U.S.

Its purchase of IBM's personal-computer division in 2005, including the company's ThinkPad line of laptops, gave Lenovo a toehold in the U.S. But the company has struggled to attract new customers, particularly small businesses and consumers.

"Lenovo is a brand new name to the consumer," senior analyst Richard Shim of research firm IDC said. "Before they do anything, they need to establish their brand here."

And the company has to boost sales quickly. Lenovo cut 1,000 jobs worldwide last year to reduce costs. Its division that includes the U.S. and Canada was the only one worldwide to post an operating loss in the most recent quarter. Quarterly sales in the Americas fell slightly, to $1 billion.

It's a disturbing trend that Mary Ma, the chief financial officer, noted in a recent conference call with analysts: "The situation in North America is the cause of greatest concern."

Meanwhile, sales growth in Asia, which has propped up the company, is slowing as rivals such as Dell gain ground.

The company is betting that high-profile sponsorship deals to emblazon the Lenovo name across major sporting events will capture consumers' attention. It signed deals in the past three years with the Olympic Winter Games, NBA, Carolina Hurricanes and Washington Redskins. This month, Lenovo announced that it will sponsor a Formula One race-car team to boost interest in Europe.

And the company wants to leverage that marketing by putting its PCs more directly in front of customers. Lenovo announced this week that it will sell ThinkPads through nearly 700 Circuit City stores, expanding on earlier deals with Best Buy and Office Depot.

Lenovo officials think that those efforts are inexpensive and effective ways to bolster its image.

"They need people to say 'Lenovo -- Oh yeah, that Chinese PC company,' " Shim said.

Without that recognition, the company will be unable to apply to the United States cost advantages from its powerful Chinese manufacturing base. With it, Lenovo might give the competition a run for its money.

"Lenovo appears to be losing steam in its core market of China," analyst Martin Kariithi with Technology Business Research wrote in a report this month. That puts pressure on the company to increase sales in Europe and the U.S., where its penetration is shallow.

Kariithi said the marketing investments might stimulate demand in the long run but they will increase operating costs and earnings pressure this year.

There are major implications locally. Lenovo's global headquarters are in Research Triangle Park, where it employs about 1,500 people, out of about 20,000 worldwide. The company is having a $150 million campus built in Morrisville, expected to open in March.

Philippe Davy, head of Lenovo's worldwide sponsorship and alliance division in RTP, is trying to lay the groundwork for stronger U.S. sales with a strategy based on small businesses and consumers as much as on large institutions.

Lenovo inherited the strategy from IBM, which sold PCs primarily to augment server sales and big corporate consulting contracts.

"We need a much higher level of brand awareness outside China," Davy said. "Sports sponsorship is our broadband solution."