Lenovo PC sale irks US congressman

While the CNOOC/Unocal mess is still fresh in our minds (by “mess” we mean a resounding victory for those that have American interests at heart), another Chinese company, it seems, has found itself in the crosshairs of US law makers. Lenovo, a Chinese PC manufacturer, has raised a few eyebrows among congressional leaders with its impending sale of 16,000 desktop PCs to the State Department.

House chairman of the Small Business Committee, Rep. Don Manzullo had this to say:

My big concern there is if you have these state-owned enterprises that don't have to make any money, they can underbid to gain market share.

Interesting take. We did a little digging ourselves. Lenovo is 27 percent owned by the Chinese government, IBM owns 18 percent (it sold its PC business to Lenovo), and the rest is publicly traded on the Hong Kong Stock Exchange.

A 27 percent owner that is willing to subsidize for the benefit of all shareholders -- we are on the phone with our brokers now! Lenovo, of course, refuted Rep. Manzullo’s claim. Regardless, the claim of subsidization sounds pretty absurd to us. Aside from China’s mere 27 percent ownership, PC component prices are completely transparent. Any underbidding would draw swift responses from competitors such as Dell and HP, to say nothing of the Federal Trade Commission and the WTO. Lenovo can ill afford a "dumping" label in its quest to gain a foothold in overseas markets.

There was also a claim of a potential security issue. Again, because of Lenovo’s ties to the Chinese government, some were worried that the 16,000 PCs may come with an unwanted upgrade, courtesy of People’s Liberation Army. We would agree with that assessment: If nothing else, President Hu Jingtao just may want to get a sneak peek at Bush’s spring wardrobe, so he and his wife can coordinate their attires during the upcoming state visit. But, then we are reminded, of all the world’s notebooks, 80 percent are manufactured in China. Since no compromising photos of world leaders have surfaced on the net (JibJab not withstanding), we assume security breaches via Chinese manufactured PC/notebooks isn’t a big issue. Besides, the chance that Lenovo would risk its reputation in such a high profile sale by installing spycams/keyloggers on its PCs is pretty slim.

So, if all these facts are so readily apparent to Shanghaiist, why then the big brouhaha? Was it something in the freedom fries the congressman had for lunch? We went to Rep. Manzullo’s home page and saw this:

In 2006, Congressman Manzullo is continuing his mission to restore manufacturing in America and create good-paying jobs for the people of northern Illinois and throughout our nation.

Think we’ve heard that before. A few clicks later, we found this site: Manzullo for Congress. 2006 is a mid term election year and guess who’s up for re-election?

Shanghaiist is all for tough talking public officials protecting America’s best interest home and abroad. We don't however think much of hypocritical grandstanding and xenophobic cage rattling, over-politicizing trade issues for one’s own political expediency. To some US legislators, “Put America First” has somehow become a warped foot race to the bottom of the protectionist barrel. How things will play out for Lenovo, we don’t know. Looking at the CNOOC outcome and events surrounding the Dubai port deal, we aren’t optimistic. If there’s at all a silver lining in this story, Lenovo just got a lot of free press. Look for it to climb the brand equity chart next year!