Lenovo: Building The New PC Company

| © 2006 LenovoLenovo Confidential

Lenovo: Building The New PC Company

Steven BandrowczakSenior Vice President and CIO

| © 2006 LenovoLenovo Confidential Page 2 of 19

Lenovo: Building the New PC Company June, 2006

• Revenue: FY 06 ~$13.4B (USD) • Number of Employees: 19,000• Sales Representation in Countries: 138• Manufacturing and Distribution Facilities:

– US, China, Japan, Mexico, UK, Hungary, Malaysia & Brazil

Who Is Lenovo?



Lenovo and China

China• Population: 1.3 B• 4th largest economy--- $1.79 Trillion (2005)

– A more than tenfold increase in GDP since 1978 – Expected GDP Growth 2006 – 2010: 8%– Export: $752 B, Import: $631 B (2005 est.)

• Internet Account: 111 M (2005)• Cell Phone Users: 444 M (2005)• PC shipment: 19.3 M, a 29% increase annually

(2005)

in China• The Largest PC Maker: 33% Market Share• Profit Margin: 4.9% (before the merger)



1000 PC Patents filed in last 4 1000 PC Patents filed in last 4 yearsyears

900 Lenovo engineers and scientists 800 former IBM research & development staff in Raleigh and the renowned ThinkPad Japan

Design Center

IBM – ThinkPad, ThinkCentre, IBM – ThinkPad, ThinkCentre, ThinkVantage Technologies win ThinkVantage Technologies win more awards than any other PC more awards than any other PC

company company

Lenovo: Intel Most Innovative Lenovo: Intel Most Innovative PC Award from Intel 5 years PC Award from Intel 5 years

runningrunning

Powerful R&D Powerful R&D Capability on both Capability on both

Computing and Computing and CommunicationsCommunications

Founder of Founder of Personal ComputerPersonal Computer

Leading Innovation Leading Innovation in PC Industryin PC Industry

Deeply UnderstandingDeeply Understandingon both Consumer and on both Consumer and Commercial customerCommercial customer

Lenovo Innovation for Customer Value and Benefits



Six Lenovo Attributes

4. International & Industry Leadership

6. Efficient and Easy to Do Business with

5. Trustworthy

2. High Quality & Reliable Products*

3. ServiceExcellence*

1. Innovation*

* Core Attributes



Lenovo IT Vision and Mission

VISION Integrated business partner that is acknowledged as a world-class leader

in innovation that continuously enhances shareholder value

MISSION Ensure the IS strategy is an integral part of the business strategy. Manage the IT portfolio to maximize the business value of investments. Develop and manage IT services partnerships. Provide solutions that maximize value for the business. Manage our organization to be a world-class solution provider.



Business Transformation – IT is the Key Enabler

Lenovo China

Lenovo International

One Lenovo

Global Business Processes Central/Integrated IT Systems Central Planning and Control Dual Model Centralized Inventory Mgmt Real-time Data Visibility Flexibility to Adapt to Change



China PC Revenue

Dell, 10%

Others, 33%

HP, 9%

Founder, 10%

Lenovo, 38%

Leveraging the Very Best of Lenovo China

Global PC Leadership

Building on the Model of Success

GOING GLOBAL World-class Practice Estimated $250M company-wide savings Build an industry leading supply chain

- Reduce end-to-end Supply Chain Cost by 15%- Compress Order Fulfillment lead time from 14 to 10 days- Maintain low DOA level

Targeted 1.1% corporate E/R Pursuing new market opportunities



Base Building Block For The New Design (MCS)– Start with China Business Processes and IT– Standardize Data Model – Globalize Operating Model

Implementation Strategy

‘Adopt and Go’ Initiative

– China IT System Upgrade from R3 to MySAP ERP Oct. ’06

– Rollout India using China MySAP ERP (Process Change) Oct. ’06– Migration of China EC to MySAP CRM Dec. ‘06– Upgrade China i2 and key local applications Feb. ’07– Complete value chain driven by business model Oct. ’07– Complete country Rollout by May ‘08



– Keep current IT spend (2% of revenue) flat during transformation and SAP implementation period

– Drive out I/T cost short-term and long-term targeting a 1.1% E/R– Leverage SAP as the core enabling application in the Lenovo Transformation

‘Adopt and Go’ Initiative

I/T Objectives

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IT Application Architecture

• NPI/EOL• BOM/Routing• Resource• Planning Data• Business Rules

Meta-data/Workflows/Business

Rules

BusinessApplication

Layer

Enterprise Integration Bus

TransactionData

PDM

EAI/ETL Layer

MasterData

PlanData

ParameterData

CRM FI/CO Legacy

Data Management

Layer

Custom

er Facing

SRM

/ Supplier Collaboration

Channel Inv.Management

(VMI)

Network Strategy

InventoryOptimization

StrategicSourcing

FactoryPlan / Schedule

MasterPlanning

DemandManagement

SupplyCollaboration

DemandFulfillment / ATP

TransportationPlanning

Procurement Order Management

Transportation , Warehouse and Trade Management

Customer Order Management

Storefront

Demand Collaboration

SupplyVMI

SRM

Manufacturing Execution

End to End Visibility, Cross Functional Workflow Engine, Business Performance Management



Global Network: Foundation for Strategic Platform

China Regional Net

Sites

RTP

Americas Regional Net

Global Data CenterCommand Center

SitesSites

Sites

TBD

EMEA RegionalNet SitesSites

Sites

AP Regional Net SitesSites

Sites

SZN/HK

China Regional Net SitesSites

PEKGlobal Backbone

Sites



ThinkVantage Technologies: Managing TCO From Purchase to Disposal

Purc

hase Acc

ess C

onnections

System M

igration Ass

istant

System U

pdate

Client S

ecurity

Solution

LANDesk M

anagement Suite

Productivit

y Center

Rescue & R

ecove

ry

Secure D

ata Disp

osal

ImageUltra

Builder

Active

Protection Sys

tem

———————————— 1-3 years ————————————

Deploy DisposeProtect SupportConnect

Policy Decisions Email Solution (April 15 Decision) Limit standard images Limit hardware upgrades (1 per 3yr) Etc.

TVTs: Reduced labor costs Reduced risk Improve productivity

Result

Minimize RunExpense



Thin

kVan

tage

™ T

echn

olog

ies

Access Connections

Rescue and Recovery

Antidote Delivery Manager

ImageUltra Builder

System Migration Assistant

Secure Data Disposal

Productivity CenterServer

Management

Remote Control

OS Deployment & Profile Migration

IT Asset Inventory

Software Distribution

Handheld Management

Software License Monitoring

Security and Patch Management ThinkVantage Technologies

installed on the client

Enterprise Desktop Management - LanDesk

Corporate standardization, security, and cost-effective distribution



Internal MfgGlobal Manufacturing – Current Desktop Locations

SSCIRaleigh

Beijing

Shanghai

Huiyang

Shenzhen

Pondicherry

SSCIHungary

SSCIMexico

SolectronBrazil

FoxconnCzech

FoxconnMexico

Contract Mfg

Contract Config



Internal MfgGlobal Manufacturing – Current Notebook Mfg Locations

SSCIRaleigh

Shanghai

Shenzhen

Pondicherry

SSCIMexico

SolectronBrazil

Contract Mfg

Contract Config

Quanta Shanghai

Wistron Kunshan



Lessons Learned

• China has tremendous Intellectual Property• Extremely well skilled• Incredible CAN DO mentality• Retention / Recruiting needs focus• Cost Mode is extremely different• Sometimes manual is ok!



Global I/T in China---- Challenge / Issues

• Lack of Global Experience• Employee / Customer Privacy• Emotion• Respect face



Documents

Lenovo: Building The New PC Company