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If 'Mad Money' Cramer is right, Chinese stimulus plan could boost Lenovo

Will Chinese buy more Lenovo laptops?

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MORRISVILLE, N.C. — Wall Street analyst and CNBC “Mad Money” host Jim Cramer says China has it “right” when it comes to government-backed economic stimulus plans. Lenovo will soon find out if he is correct.

The world’s No. 4 PC-manufacturer hopes to sell 5 million additional PCs – desktops and laptops – in China this year, thanks in part to the Chinese government’s stimulus plan. The Beijing government is funneling hundreds of billions of dollars to less-developed rural areas, hoping to stimulate consumer spending.

Trying to capitalize on that, Lenovo plans to open several hundred retail outlets and to offer lower-priced PC models. If the stimulus plan works, Lenovo could boost market share in the country where the company was born beyond the current 30-plus percent.

"We are prepared to offer computers to 320,000 villages, benefiting 5 million village households, in the next three years," Xia Li, vice president of Lenovo Group, told The Wall Street Journal.

Problem is, many rural Chinese families don’t make much more on an annual basis than what a Lenovo PC or laptop costs. Plus, Lenovo’s archrivals Dell and HP have been invited to participate in the same government-backed initiative. So Lenovo, which lost money and market share globally last year, won’t have an easy time even with government incentives.

Another Leonovo effort is a renewed interest in making acquisitions in emerging markets, with Brazil’s Positivo and Japan’s Fujitsu continuing to be rumored as targets.

Last week in Beijing, where Lenovo operates one of its two headquarters (the other is in Morrisville), Chairman Liu Chuanzhi said the company is looking for financial backing.

"We hope to get some loans in support of some acquisition plans we have," said Liu, one of the company’s founders. He recently returned to the role as chairman as part of Lenovo’s recent management shakeup.

Still, it appears Lenovo remains stuck on the horns of a dilemma.

Does the PC-maker concentrate on its home turf, where HP and Dell are becoming more competitive? Or does it continue the 2008 campaign to be a global brand? Liu has certainly said Lenovo will be more focused on emerging markets than on the U.S. and Europe. He also has predicted that the company will return to profitability in 2010.

Right now, the best bet to achieve that goal after Lenovo cuts 11 percent of its work force and settles in with new management is for Chinese rural consumers to start buying. With unemployment in those areas skyrocketing as the world economy slows and demand for Chinese exports drops, PCs may be a hard, hard sell.

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