I n s I g h t L e n o V o a n d I b m g L o b a L f I n a n c e p a r t n e r t o d e L i V e r p c



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Filing Information: December 2005, IDC #34629, Volume: 1, Tab: Vendors 

Leasing Evaluation Service: PCs and PC Servers: Insight 

I N S I G H T  

 

L e n o v o   a n d   I B M   G l o b a l   F i n a n c e   P a r t n e r   t o   D e l i v e r   P C  



L e a s i n g   a n d   C h a n n e l   F i n a n c i n g  

 

Joseph C. Pucciarelli 



 

I D C   O P I N I O N  

IBM PCs and laptops are popular within both corporate computing environments and 

the portfolios of virtually every IT leasing company. As a result, when the sale of 

IBM's PC Computing Division to Lenovo Group Ltd. was completed on May 1, 2005, 

justifiable concerns were raised throughout the leasing industry that existing residual 

value positions, as well as future leasing prospects, may be diminished. IBM Global 

Financing (IGF), which holds the largest portfolio of this equipment and previously 

managed the secondary market, announced that as part of the sale finalization, a 

definitive agreement with Lenovo as the worldwide lessor and remarketing agent of 

choice for IBM-brand PCs and laptops had also been signed. Recently, IGF provided 

IDC with a detailed briefing of the program's features. Key findings follow:  

Lenovo and IGF have entered into an exclusive, five-year worldwide agreement 



whereby IGF provides end-user leasing for all commercial customers and 

distribution channels, distribution channel inventory financing, and remarketing 

services for channel open-box returns.  

IGF characterizes the Lenovo PC leasing business as a major component of its 



business plan; IDC estimates that IGF will fund $1 billion of IBM-brand PCs and 

laptops annually. IGF has launched several new PC leasing products, as well as 

expanded operational capabilities for small- and medium-ticket commercial 

transactions. IGF has retained an independent third-party company to originate 

small and medium-sized business (SMB) transactions for United States–based 

organizations, while IGF will continue to operate as the underwriter, portfolio 

manager, and remarketing agent. IGF advised us that it is currently evaluating 

other independent companies to provide a similar SMB origination capability for 

European customers.  

IDC believes that the residual values for IBM laptops and PCs will continue to 



generally track with previous experience and industry trends as IGF — the same 

organization that handled these activities previously and is well acquainted with 

the risk, opportunities, and pitfalls of PC portfolio management — continues as a 

major influence in the secondary market.  

 

I N   T H I S   I N S I G H T  

This IDC Insight considers the five-year financing and remarketing services 

agreement entered into by Lenovo Group Ltd. and IBM Global Financing and its 

implications for future resale pricing and trends of IBM-brand PCs and laptops.  

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2 #34629 ©2005 

IDC 

S I T U A T I O N   O V E R V I E W  

Despite the perception some have that IT leasing is no longer popular, a number of 

end-user organizations continue to lease their PCs (and other IT equipment) as an 

operational practice to better manage technology obsolescence, minimize capital 

investment in infrastructure assets, and comply with expanding environmental 

disposal requirements. For these companies, it is not just a question of whether 

leasing is less expensive at the time of purchase, it is a matter of whether it is less 

expensive to lease IT equipment through the equipment life cycle. We estimate that 

approximately 20% of commercially deployed PCs and laptops in the United States 

are leased or financed. Further, we estimate that 20–25% of Lenovo's U.S. 

commercial sales are leased or financed, somewhat higher than the average for other 

brands as the company's roots are strong in the corporate sector.  

There is clear evidence that residual values for three- and four-year-old PCs and 

laptops (from all leading brands) are trending up as many large enterprises extend 

their portfolio deployments from two to three years to three to four years. 

Counterintuitively, longer average deployments raise secondary market prices 

because the volume of available equipment is decreased and additional spare parts 

are required to maintain aging equipment, the source for which is parts obtained from 

displaced, dismantled machines. 

IBM Global Financing has periodically struggled with the dynamics and requirements of 

the high-velocity, low-ticket price, operationally intensive PC and laptop leasing market. 

Over the years, some mistakes were made, some lessons learned, and most business 

processes tuned. Through it all, IGF has risen to the challenges and matured into a 

pivotal industry participant — and leased billions of dollars of PCs and laptops.  

The decision by IBM and IGF to partner with Lenovo and continue to provide financing 

and remarketing services is a sound one as many of both companies' largest and most 

important customers have financed their PCs and laptops with IGF. A radical shift 

could have been financially and operationally injurious to IGF, its customers, and other 

third-party lessors holding IBM PC laptop residual value positions.  

This program announcement would be interesting if all IGF announced was a 

continuation of its current offerings in a "steady as it goes" strategy. This is not the 

case. IGF is investing in new programs, structures, and processes to better serve this 

business. We believe this bodes well for customers as it means broader and deeper 

financing program choices from a capable, enterprise-class supplier. Specifically:  

IGF announced an enhanced, three-tier PC lease pricing strategy for enterprise 



customers. The PC PerformancePlan is a traditional, fair market value lease 

based on the aforementioned higher residual values and is designed to provide 

enterprise customers with the most aggressive pricing. The PC PerformancePlan 

Plus is a structured fair market value lease with capped renewal options and "like 

for like" substitution and will be targeted to customers that have trouble tracking 

PC assets. The third major program, Price Per Seat, is a program that combines 

equipment, warranty or maintenance, and other services into a single invoice per 

unit of equipment. Price Per Seat billing continues to fill a need for a group of 

very large enterprise customers.  



 

©2005 IDC 

#34629 





Recognizing that SMBs represent an important and growing segment of 

business, IGF has revamped its program to better meet this market's 

requirements. Specifically, the company reports changes such as a simplified 

application process, two-page lease contract, one-hour credit turnaround, and 

deemed acceptance. IGF concluded it would be more effective and timely to 

retain an independent third party to implement its revised origination process. 

However, IGF continues to approve credit, determine the underwriting criteria

administer the lease, and manage the end-of-term processes. The U.S. program 

is already in place; the European program is expected shortly.  

IGF pays Lenovo a fee based on its end-user leasing activities. The companies 



have also announced a range of other marketing programs and organizational 

measures to link sales incentives, deal tracking, messaging, and marketing 

activities. 

IGF will continue to provide inventory financing to distribution channel partners. 



The company reports financing several billion U.S. dollars of product annually.  

F U T U R E   O U T L O O K  

A wide range of companies continue to acquire IT equipment and services through 

structured financial instruments. IDC estimates that 20% of commercially deployed IT 

equipment in the United States continues to be leased or financed. We believe that 

PC leasing will continue to be utilized by a broad spectrum of companies to address a 

wide range of business problems. That we expect IGF to lease $1 billion of IBM-brand 

PCs and laptops annually neatly underscores this point.  

IGF's latest program announcements tune the company's program offerings to meet 

differing customer needs. For end-user organizations that have trouble tracking their 

deployed IT assets, we believe that the PC PerformancePlan Plus program with its 

capped renewal options and "like for like" exchange are welcome features in a market 

where financing options are often less flexible.  

We believe that IGF's continued commitment to this market will reassure other leasing 

companies that PC leasing remains an interesting and active market. Successfully 

structuring, administering, and managing large portfolios of relatively inexpensive 

assets requires a significant investment in people and process. IGF is demonstrating 

to the industry and customers that it can be done. We believe this alliance serves 

both companies' purposes well. Lenovo continues to have one of the largest IT 

lessors supporting its sales and remarketing efforts. IGF and IBM benefit by having 

continuity, both with their existing customers and in managing their existing portfolio 

risk. Finally, we believe customers benefit from this business alliance because IGF's 

active presence in the PC and laptop leasing market means customers continue to 

have another highly capable company potentially pursuing their business.  

As we look into the far distant future, beyond the five-year program agreement, it is 

difficult to foretell what the parties, Lenovo and IGF, may decide. Regardless of 

whether IGF continues to operate with a worldwide exclusive or not, the company will 

remain a key influence in the IBM-brand PC and laptop market for years to come as it 

manages billions of dollars of maturing lease obligations and used equipment.  




 

4 #34629 ©2005 

IDC 

As we move into 2006, IDC believes the economic climate will be characterized by 



rising interest rates, modest macroeconomic expectations, and relatively higher 

secondary market values for three- and four-year-old IT equipment. These 

environmental factors, combined with tightening equipment disposal requirements, 

expanding end-user internal IT requirements such as Sarbanes-Oxley compliance, 

and generally higher levels of business activity, will continue to swing the IT leasing 

pendulum back to the growth phase.  

 

 

 



C o p y r i g h t   N o t i c e  

This IDC research document was published as part of an IDC continuous intelligence 

service, providing written research, analyst interactions, telebriefings, and 

conferences. Visit www.idc.com to learn more about IDC subscription and consulting 

services. To view a list of IDC offices worldwide, visit www.idc.com/offices. Please 

contact the IDC Hotline at 800.343.4952, ext. 7988 (or +1.508.988.7988) or 

sales@idc.com for information on applying the price of this document toward the 

purchase of an IDC service or for information on additional copies or Web rights. 

Copyright 2005 IDC. Reproduction is forbidden unless authorized. All rights reserved. 

 

 



 

 

 



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