From IBM to Lenovo: Architecting a Global Supply Chain Divestiture in 143 Days

1. David Eagle Business Development Executive From IBM to Lenovo: Architecting a Global Supply Chain Divestiture in 143 Days

2. 2 A robust supply chain is essential for an on demand business

3. 3 In 2002, IBM integrated our supply chain operations into a single organization

4. 4 When IBM put it together, it made an impressive footprint

5. 5 Forming an organization with a compelling vision was a start. But to drive change and deliver sustainable results IBM had to: Transform & strengthen the functions while building end-to-end capability Reduce fixed costs and drive flexibility in infrastructure Implement common global processes & technology Apply governance, performance goals and reporting disciplines Tend to the culture, emphasize talent and improve skills

6. 6 Today, it is integrated across IBM�s business

7. 7 The on demand model is giving IBM: Greater efficiency Server volume growth contained with minimal spending increases yielding ~10% productivity gains Procurement "hands free" transactions up from 78% to 90% Logistics volumes up 31%, costs down 21% A more variable cost structure Fixed spending for high volume systems manufacturing down 33% over 3 years Logistic warehousing from 100% owned to 100% vendor managed Improved responsiveness and flexibility Ability to respond to shifts of hardware demand inside quarterly lead time by up to 50% Customer fulfillment e-Applications reduced annual calls from clients by over 600,000, saving 2.9M Reduced number of non-strategic suppliers by 80% Better business process controls Reduced escapes (maverick buying) from a high of 35% to less than 0.2% Acceptable business controls (audits) from 85% to 95%+

8. 8 IBM/Lenovo Transaction and Project Management

9. 9 IBM and Lenovo Transaction Strategic Alliance for IBM and Lenovo New Lenovo Overview Leveraging Strengths Complementary Organizations Lenovo Transaction Background / Details Challenges Faced Project Management Key Success Factors to Execute

10. 10 IBM and Lenovo: Enter into Long-term Strategic Alliance

11. 11 The New Lenovo: Overview $13B sales (last 12 months) 19,000 employees WW Headquarters: New York, USA Principal operations: Raleigh, Beijing Public company with ownership positions by Lenovo and IBM Notebooks and Desktops Enterprise, Mid-Market, Consumer & Small Business

12. 12 The New Lenovo: Leveraging strengths to pursue opportunities

13. 13 A Perfect Fit between Complementary Organizations

14. 14 Lenovo Transaction Background / Details Divesture of IBM�s Personal Computing Division (PCD) to Lenovo announce Dec 2004. Transaction transferred business with revenues in excess of $10B/yr and valued at $1.75B. Global business with worldwide reach transferring 11,500 IBM employees, more than 100,000 customer, 23 functions, 66 countries and 100+ business partner supported countries worldwide. IT systems segmented impacting over 2,000 applications including SAP and over 100 legacy systems within 143 days from the signing and public announcement to the closing. Transition designed to ensure transparency to the customer with no adverse effects impacting the market nor the shareholders for both companies.

15. 15 Lenovo Transaction � Challenges Faced Managing complexity of global landscape across Functions / Countries / Process Extremely aggressive timeline � 143 days from announcement. Segmentation of a fully integrated PCD from IBM (e.g. 11,500 employees with integrated roles, common infrastructure, manufacturing sites, indirect support, Sales and IT) Focus on linking process, data & tools Business Model and Legal Structure Financial Landscape Unique ledger system created for Lenovo True-ups, balance sheets, feeders, TSA / MSA management

16. 16 Management and Segmentation of the Project Small �Core� Project Office focused on managing & delivering operational readiness Accomplished through: Highly structured weekly/daily management system cadence managed by IBM Business Consulting Services Driving ownership and accountability Managing critical milestones and dependencies Segmented project into 6 manageable phases/steps Deal definition and negotiation Initial project plan development Detailed project plan development Readiness review phase Readiness signoff phase Post closing project completion Managed across Functions, Geographies, Countries and Processes

17. 17 Project Office Structure Complexity

18. 18 Key Success Factors to Execute Project Office with the authority to manage project and risks end-to-end Ensure Executive and team support identified with ownership & accountability Defined key critical checkpoints and project milestones Lock down project scope, business model changes and IT Communicate critical decisions and information frequently and globally Drive strict weekly/daily and critical checkpoint cadence Obtain Executive sign offs and manage to completion Ensure deal execution and stabilization of operations with no adverse impact to customers, shareholders nor financials.

19. 19 Key Takeaways The on demand strategy drives greater efficiencies, a more variable cost structure, improved responsiveness and flexibility, and better business process controls for your company, your shareholders, and your clients. Transformation is about integrating processes, people, data and tools to create a stable environment. Experience is key. The skills that were gained are now being made available to other areas within IBM as well as to our clients. IBM�s on demand strategy provided the flexibility required for success with the Lenovo divestiture.