Lenovo Group Ltd. (992), the second-biggest personal-computer maker, is forging a partnership with EMC Corp. (EMC) aimed at helping the companies boost sales of storage equipment and the powerful server devices that run corporate networks.
As part of the agreement, Lenovo will resell machines made by EMC, the leader in storage, Peter Hortensius, head of Lenovo's Product Group, said in an interview. The sales will initially happen in China before moving abroad, he said.
The agreements, announced in Beijing today, help Hopkinton, Massachusetts-based EMC gain wider foothold in China, the second-largest economy. Lenovo gets to expand in products besides personal computers and add sales in regions beyond Asia.
"We've been looking for an opportunity to grow our server business outside of China as well as get into more commercial products than just our PCs," Hortensius said in a telephone interview today. "EMC has some interests that are very complementary to ours."
The companies are also forming a joint venture that will help them sell storage equipment to small- and mid-sized businesses. Beijing-based Lenovo will own 51 percent of the venture after contributing an undisclosed cash sum. EMC, chipping in assets and resources of its Iomega business, will own the remainder.
Lenovo climbed 3.4 percent to HK$5.56 as of 10:29 a.m. in Hong Kong trading.
The reseller agreement focuses on network storage, and it replaces a partnership EMC had with Dell Inc. (DELL) The earlier partnership was terminated last year after Dell became a rival by entering the storage market, said Joel Schwartz, EMC's senior vice president for global new business development. The company is looking to China as a source of growth this year amid ebbing demand in regions such as Europe, David Goulden, EMC president and chief operating officer, said in an interview last week.
"People say 'Well, China is slowing,' but China's GDP will still grow at a healthy rate this year, albeit perhaps not as healthy as people expected last year," Goulden said. While EMC doesn't break out revenue from China, Goulden said the country is probably EMC's biggest in the Asia-Pacific region.
EMC and Lenovo will also work together on servers to be sold by Lenovo and eventually embedded in EMC storage equipment.
The partnership will not be material to either company's earnings in the current fiscal year, the two said in a statement.