Computer business Lenovo is getting paid large amounts of money to use Intel chips in its machines.  This current profitability for the computer business could fade, according to experts.  

Recently Lenovo signed a $100 million annual incentive plan with rival Advanced Micro Devices (AMD) after rising into the third-largest computer maker spot.  In 2004, Lenovo became the first Asian computer business to work with AMD, and last year AMD announced Lenovo’s desktop computers were about half Intel-based and half AMD-based.    

The burgeoning relationship between computer business Lenovo and AMD was responsible for a lot of Lenovo’s quick growth because the company was able to offer AMD machines for lower prices than those with Intel chips.  According to industry experts, AMD has been really putting pressure on Intel.  Asia, not including Japan represents 22% of global PC sales.

If computer business Lenovo decides to develop more of a relationship with Intel, AMD would suffer.  AMD has been involved in legal battles with Intel for allegations of improper business practices, but has yet to gain a clear victory.

Computer business Lenovo got $22 million as an incentive payment from Intel at the end of the third quarter last year.  The company has not announced a deal with Intel, but did not argue the amount of the $22 million when confronted.  The payment to the computer business is dependent on difference incentive categories, such as the number of chips Lenovo buys and the reimbursement of advertising money the computer business spends on promoting Intel-based machines.  The target has been set at 17 million chips per year, which is equal to Lenovo’s current annual computer production.     

A Lenovo spokeswoman, Julie K. Gottlieb stated the computer business has to agree on the best prices and terms with partners and suppliers to explain the recent buzz.  The $22 million amount is a lot of money for Lenovo if it is working like earnings.  It represents .55% of the total earnings for the company.  If figures are right, the improvement in gross margin could be directly attributed to the Intel incentive payments.  

This possible truth might chance interpretations of computer business Lenovo’s success in the industry in recent years.  For more information on this story, visit the link attached.

Created By:  Computer Consulting 101