Lenovo Case Analysis

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Guess what happened in the technology industry in 2005? People from all over the world pay attention on the computer empire. Lenovo Group, which used to be Legend and the largest personal computer manufacturer in China, acquire IBM’s personal computer division in May 1, 2005. This deal business marked that the third largest PC enterprise was born. Lenovo Group will own the ThinkPad and ThinkCenter trademarks for the coming five years. Lenovo Group was set up in 1984, the founder Liu Chuanzhi leaded 10 technology people to acknowledge PC area and hold an idea that advanced technology will change people’s work and life. During 27 years development, Lenovo Group now has its main products in desk-top computer, service, lap-top computer, printer, pocket computer, monitor, and cell phone. Since 1996, the sales number of Lenovo computer reached on the first place in the market of China. In 1988, Lenovo established itself in Hong Kong. In 1989, Lenovo Group Company set up in Beijing. In 1990, Lenovo listed securities in Hong Kong. In 1998, Lenovo reached the one million mark in producing Lenovo Computer which was collected by the Intel Museum. In 1999, Lenovo became the super computer seller in Asia. In the 21 century, Lenovo became one of the best ten management computer manufactories. Yang Yuanqing took up the post of president and CEO of Lenovo. The stock price of Lenovo went up immediately. In 2003, Lenovo started to use new identification “Lenovo”. Before 2003, Lenovo used “Legend” as the identification. Also, Lenovo became the first Chinese enterprise to cooperate with International Olympic Committee (IOC), and support for 2006 Turin Winter Olympic Games and the 2008 Beijing Olympic Games. Of course, in 2005, New Lenovo set up to be the third largest computer group in the world. The fact that IBM sold the PC Division to Lenovo Group is also the manufacture work. IBM is the earliest factory which is to start produce personal computer. Since four years before the sale, Because of IBM’s problems on management, the PC division had cumulative losses of nearly $1 billion. Therefore, the PC division stayed in the deficit stage for a long time. For this reason, IBM wanted to sell this division to Lenovo Company with benefit of entering Chinese market. IBM got at least $650 million cash and worth for at most $600 million common stock from Lenovo Group. As a result, IBM will hold 18.9 percent share of stock from Lenovo Group to become the second largest shareholder of Lenovo group. In 2008, the fiscal year income of Lenovo reached to $149.01 billion, and that was the first time to get into the 500 Business in the world which placed in the 499 place. In 2009, Liu Chuanzhi came back to assume the office of the chairman of the board of director. In 2008, the financial crisis swept the whole world. Lenovo has no exception. On the last quarter of 2009 fiscal year, the net loss was $2.64 billion. The whole year total sales were $14.9 billion, and the net loss of 2009 was $2.26 billion. It was worse to compare with the same quarter in 2008. In 2010, the data showed to us was worse than 2009, which is unbelievable. How is it going in 2011, people will be waiting to see.

Financial Statement
Financial statement analysis is the evaluation of a company’s prospects and risks for the purpose of making business decisions. It is also an important part of business analysis. Consequently, after basic understanding of the background about Lenovo’s purchase of IBM’s PC division, financial statement analysis appears to be necessary to help internal management and external statement users know different aspects of the changes in Lenovo.

Illustration of Ration Analysis
Exhibit 1
According to Exhibit 1, we begin to analyze the change of Lenovo. First of all, you can see two measures of short-term solvency for the recent six years. Several findings should be noted. The current ratio in 2008 was at its lowest point for these...
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