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To: Don Dorsey who wrote (29903)	2/24/1998 6:23:00 PM
From: DiViT	Respond to of 50808

A Legend in the Making: The Chinese are Nuts About the PC... Their Favorite: A Homegrown Brand by Andrew Tanzer Forbes 03/09/98 Sales of personal computers may be collapsing in Korea and Southeast Asia, but in China the market continues to grow. Scorekeeper International Data Corp. forecasts that the Chinese market will expand by a third this year, to more than 4 million units, after growing over 40% in 1997. The Chinese government is pushing computerization; better still, owning a PC has become a status symbol in a society that sets great store by status. IBM, Hewlett-Packard and Compaq are cashing in, according to IDC, but they trail a local outfit, Legend Group. This is not entirely a matter of loyalty to the home team. "They're faster on their feet than foreign companies in adapting to the latest technology," says Philip Yu, president of Compaq Computer's Greater China Division. "Their management team is very young, with a strong entrepreneurial spirit." Legend recorded sales of more than $1 billion last year--small beans by U.S. standards but a lot of money in this still-poor country. The company was founded in 1984 by a group of scientists and engineers armed with about $80,000 from the Chinese Academy of Sciences. "The academy couldn't give us much money, but they gave us freedom to hire and make our decisions," says Liu Chuanzhi, Legend's founder and chairman. "They didn't want us to be like a typical state-owned enterprise." Legend started by making simple products, such as digital watches and Chinese-language computer input devices. Step-by-step, starting with distribution of foreign computer gear, Legend developed its own PCs. Even today it remains China's largest distributor of Hewlett-Packard PCs and printers, Toshiba notebook computers and Hayes modems. Liu is a keen student of Hewlett-Packard management. Comments HPexecutive Ken Koo: "Legend grew with us. They learned vendor channel management from HP. We helped develop Legend into a strong PC company in China." By the time Legend launched its own branded PC in 1990, it already had a strong distribution network in place. With that--and prices 30% below those of U.S. companies--Legend grabbed the lead in late 1996 and has held it. Legend underprices IBM and HP models and offers service and support that nonbranded local clonemakers can't provide. It is careful, too, not to let foreigners gain a technological edge. Legend introduced a Pentium- chip model in China before the foreign vendors, and last year it was the first to break the RMB10,000 (U.S.$1,200) barrier with a Pentium II model. "[Legend] is synonymous with leading-edge microprocessor technology in China," asserts Sean Maloney, vice president of Intel Semiconductor Asia-Pacific. To be sure, there's a bit of chauvinism involved in Legend's success. "If the quality and price are the same, they [the Chinese government] will buy a domestic brand first," admits Yang Yuanqing, the 34-year-old head of Legend's PC division. Legend's slogan, "One family, one computer," resonates with Chinese consumers. Per capita income may be less than $1,000 in China, but as family income grows, Liu thinks a computer will be high on any family's buy list. "Chinese families pay a lot of attention to children's education," he reasons. "It's Chinese nature that if your neighbor has one, you must buy one. It's a kind of competition." Yang predicts Legend will ship more than 1 million units in the year 2000, 40% to 50% of them home PCs. Foreign investors will have a chance to invest in this ambitious enterprise. By the end of March Beijing- based Legend will sell its PC manufacturing and distribution units to a Hong Kong-listed "red chip" offshoot, Legend Holdings Ltd., for $270 million. Investors wishing to hitch their wagons to Legend's star can buy Legend shares. You can also bet that the Hong Kong affiliate will offer additional shares to foreigners as a means of raising expansion capital for this ambitious outfit.