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Legend Looks To Defend Its Turf -- WTO Entry Will Force China's Top PC Maker To Fend Off Unrestricted Rivals
Faith Hung. EBN. Manhasset: Dec 17, 2001. , Iss. 1293; pg. PG.44
Abstract (Summary)

Since 1999, Legend has risen to become the leading PC maker in China, a market that had previously been dominated by foreign OEMs. In just three years, Legend's share in the world's fastest-growing PC market tripled, from 12% to 30%.

Unfettered by the restrictions that have limited foreign companies in China, Legend has been free to extend its network into every corner of the country. While foreign competitors are generally confined to major cities, Legend has placed thousands of distributors throughout China. The company's native familiarity with China also gives it the logistical understanding and negotiations savvy to keep procurement costs and inventory levels down. According to internal data, Legend's inventory level is usually less than 20 days, compared with 30 days for Compaq Computer Corp.

"The most significant impact on Legend after China joins the WTO is rising competition from Dell, Toshiba, and IBM," said Paul Bai, an assistant vice president at Taipei, Taiwan-based contract manufacturer First International Computer Inc., which supplies Legend with 15,000 laptops per month. "Legend has told us that it intends to be cautious about its outlook for next year."

Full Text (687  words)
Copyright CMP Media LLC Dec 17, 2001

When it had the home-field advantage, Legend Holdings Ltd. became the star of China's PC market. But now, with China's entry into the World Trade Organization, Legend finds itself on a more level field, with players from all over the world aggressively pushing forward.

Since 1999, Legend has risen to become the leading PC maker in China, a market that had previously been dominated by foreign OEMs. In just three years, Legend's share in the world's fastest-growing PC market tripled, from 12% to 30%.

Unfettered by the restrictions that have limited foreign companies in China, Legend has been free to extend its network into every corner of the country. While foreign competitors are generally confined to major cities, Legend has placed thousands of distributors throughout China. The company's native familiarity with China also gives it the logistical understanding and negotiations savvy to keep procurement costs and inventory levels down. According to internal data, Legend's inventory level is usually less than 20 days, compared with 30 days for Compaq Computer Corp.

But now that Legend has blazed a trail into China's market, the company's next challenge will be to prevent its rivals from paving over those roads. Already wary of local players moving in on its territory, Legend expects China's WTO membership to result in an increased threat from overseas.

"The biggest challenge we face is competition," said Mary Ma, Legend's senior vice president, executive director, and chief financial officer. "That includes brands both from overseas and here in China."

Ma was the main negotiator of Legend's $200 million deal with AOL Time Warner in June to develop the Chinese Internet market, a partnership that she believes will be essential to Legend's success in the open market after China's WTO entry.

The company is trying to cultivate relationships with powerful allies to strengthen its position against the likes of Dell Computer Corp., which already has launched an aggressively priced PC sales campaign on the mainland. Dell cut the price of its SmartPC by 4% at the end of November, undercutting Legend's lowest price. The SmartPC increased Dell's market share to 4.9% in the third quarter, making it the most successful foreign brand, while Legend's share declined in that quarter, according to analysts.

"The most significant impact on Legend after China joins the WTO is rising competition from Dell, Toshiba, and IBM," said Paul Bai, an assistant vice president at Taipei, Taiwan-based contract manufacturer First International Computer Inc., which supplies Legend with 15,000 laptops per month. "Legend has told us that it intends to be cautious about its outlook for next year."

While the WTO is having a leveling effect on the competitive terrain, Legend must also contend with a leveling of unit sales volume in the PC market after years of explosive expansion. Sequential unit sales growth in China slowed to 13% in the third quarter, compared with 28% and 48% sequential gains in the first two quarters, respectively, according to IDC, Framingham, Mass. At the same time, Legend's third-quarter revenue fell 12% year-over-year, to $1.48 billion.

In response to slowing growth, Legend has cut its unit shipment target from 3.7 million to about 3.2 million for the year ending March 2002, said Ma, who attributed the slowdown to a flattening consumer segment.

"This year we spotted the market had a drastic slowdown in July, but the corporate market did better than usual. So we shifted our strategy very swiftly," she said. "For September, our overall market share was 31.5%. While the consumer share dropped to 37.8%, down about 1% from recent peaks, our corporate segment jumped from 26% to 29.7%."

While Legend intends to defend its position in China, there are no immediate plans to take the battle to foreign competitors' home markets. "For the next three years, Legend will focus on the Chinese market," Ma said.

This does not preclude such foreign partnerships as the AOL deal, or another agreement this year to outsource motherboard manufacturing to Gigabyte Technology of Taipei. According to Ma, Legend has a special relationship with Taiwan's companies that exemplifies a growing trend of cross-strait interdependence.

http://www.ebnonline.com/

Copyright 2001 CMP Media LLC

Indexing (document details)
Subjects: Trade restrictions,  Computer industry,  Corporate profiles,  Strategic planning
Classification Codes 9179 Asia & the Pacific,  9110 Company specific,  8651 Computer industry,  1300 International trade & foreign investment,  2310 Planning
Locations: China
Companies: Legend Holdings Ltd (NAICS: 551112 334113 )
Author(s): Faith Hung
Document types: Feature
Section: SPECIAL REPORT:Companies To Watch
Publication title: EBN. Manhasset: Dec 17, 2001. , Iss. 1293;  pg. PG.44
Source type: Periodical
ProQuest document ID: 95452714
Text Word Count 687
Document URL:

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