News Story by Robert McMillan

MARCH 03, 2005 (IDG NEWS SERVICE) - Executives from IBM's PC division and Lenovo Group Ltd. were out in force this week at IBM's annual PartnerWorld conference looking to reassure channel partners that there will be no disruptions when the Chinese company's landmark $1.75 billion acquisition of Big Blue's PC group is completed. The deal is expected to close later in the second quarter.

Lenovo and the IBM PC group have close to 100 employees at PartnerWorld this year, five times the number that have attended in the past between the two, and assuaging channel concerns over the acquisition clearly is a priority for IBM. "How successful we will be together for the next 24 months ... will be determined in the next four months," said Steve Ward, senior vice president and general manager of IBM's Personal Systems Group.

IBM will be stepping up its PC marketing over the next year, and Ward announced plans to spend $200 million on PC advertising and demand generation over the next year. The company has also lined up 320 reference customers who are willing to endorse Lenovo and IBM's PC division in marketing materials, Ward said, in an address to attendees yesterday.

Ward clearly was looking to respond to criticism from Dell Inc. of the planned merger. When reports of the deal first surfaced in December, Michael Dell gave it a low chance of succeeding. "When was the last time you saw a successful merger or acquisition in the computer industry? It hasn't happened, at least not in a long, long time," Dell's chairman said.

"The bad guys are using what's happened at Hewlett-Packard ... to say that their model is right," Ward said. "We can't let that happen."

IBM executives have stressed that following the merger, channel partners would see virtually no changes in the way they deal with the PC division. Virtually everything, including product numbers, sales representatives and financing options will remain unchanged, they said.

But the merged company will be much smaller than IBM and more nimble at responding to channel demands, Ward said. "Something that we need to change is that in IBM we have the tremendous power of all these products. The difficulty is sometimes it's a little bit difficult to do business with us because of that breadth. That's not the case with Lenovo."

Still, some show attendees were skeptical that the merger of two such different companies could make the combined entity more responsive. "How are they going to be more agile with a company like Lenovo?" said Daniel Fortin, vice president of business development at Mensa Solutions Inc., a channel partner in Montreal.

Over time, it will be more difficult for Lenovo to keep its products aligned with IBM's, and other changes are an inevitable part of the merger, Fortin said. Still, the combined company will probably be able to offer lower prices, he said.

Bob Venero, CEO of system integrator FutureTech Enterprises Inc., had questions about the deal when it was first announced. "Like everyone, we were concerned right out of the gate because we didn't have much information at that time," he said.

But after learning about IBM's strategy, he became convinced that the acquisition would be good for business. At PartnerWorld, he joined Ward onstage to endorse the merger, which he now believes will give IBM an edge in competing with Dell.

Venero gave his own interpretation of Michael Dell's December comments. "When somebody talks too much about something, they're scared. And if I'm sitting in Michael Dell's chair right now, I'm scared," he said.