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| BRAINSTORM |
A global legend in the making
By David Kirkpatrick
FORTUNE.COM
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(FORTUNE.COM) -- A prominent item in last Saturday's New York Times resonated with me. The story said that Legend Group, one of China's largest tech companies and the leading PC vendor in Asia, now sets its sights on the world market-aiming for 30 percent of sales outside China by 2006, up from a tiny percentage now.
The news put me in mind of one of my most memorable business trips: five days in China with Intel Chairman Andy Grove back in 1998. The Intel boss was a hero in tech-mad China, not least because he had been Time magazine's 1997 man of the year. One of the primary reasons for Grove's visit was to attend the celebration of the production of Legend's one-millionth PC. I tagged along for the spectacle-loaded with both cheesy entertainment and passionate testimonials about the importance of technology to China's future. It left me with a deep respect for this company's commitment to winning.
The year before my visit, Legend had surpassed IBM to become the largest PC vendor in China. Today, almost five years later, Legend sells almost a million PCs every quarter. It dominates the Chinese PC landscape with a 27 percent market share. And China is the market to dominate these days. It is the world's fastest-growing large PC market, with sales rising 20 percent annually. That compares to an essentially flat market in the U.S. and Europe. This year China will surpass Japan to become the world's second largest PC market.
On the strength of its sales in China alone, Legend is the largest PC vendor in all of Asia, with 11.4 percent, says Gartner Dataquest. Expect that number to grow with the new focus on non-Chinese markets. Legend is already competing fiercely in Hong Kong. But the opportunities are great elsewhere in the region as well. The PC market grew 40 percent last year in Thailand, and 20 percent in Vietnam.
Legend isn't only a PC company. It also sells a million cell phones a year, and is making a major push into PDAs. It sells a PocketPC device, and plans shortly to start selling one based on the Palm OS as well. And services are the company's big new focus, just as they are for its giant overseas rivals like IBM and HP.
It remains to be seen, however, if the company has the managerial depth to match IBM and HP and become a major market force outside Asia. On my visit five years ago I was underwhelmed by the executives I met. Still, Legend is not to be dismissed as a global competitor. It has always positioned itself as a quality brand. Unlike Huawei, the Chinese network-equipment company that Cisco accuses of stealing its intellectual property, Legend has generally played by the rules since its founding by the Chinese government Academy of Sciences in 1984. It buys top-of-the-line chips from Intel (thus Grove's visit) and actually pays Microsoft for Windows, unlike many PC-makers in China.
But it also innovates-its consumer machines are sometimes compared to Apple's. Not only do they run Windows, but the so-called "dual-mode" devices also run Legend's own easy-to-use operating system. CFO Mary Ma told the Times that the company plans to double its R&D budget to between 3 and 5 percent.
Legend already behaves much like a global company. For example, it sources ultra-thin laptops as well as PDAs from Taiwan, where the world's device design skills increasingly reside. Ma says Legend will begin working to build its brand globally and possibly soon launch market tests in the U.S. and Europe. Acquisitions, she says, are a possibility, as are marketing partnerships. Could this be a possible salvation for struggling Gateway?
Either way, add another company to your mental map of the PC industry. Legend is here to stay.
