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EMC (EMC) knows that, as time goes by, its leadership in cloud computing depends on maintaining the lowest possible cost structure.

That cost structure comes with what is, potentially, the largest cloud market, China. So EMC today moved to deal with both challenges in a tie-up with Lenovo (LNFGF.PK) the Chinese PC maker that bought IBM's own PC business last decade.

CEO Joe Tucci said in a statement that the first goal is to increase sales, calling the deal powerful opportunity for EMC to significantly expand our presence in China ... and extend it to other parts of the world over time."

The risk is that the deal turns Lenovo, already the second-largest maker of PCs, into a bigger competitor in network storage. The deal is, initially, an Original Equipment Manufacturer or OEM agreement, with Lenovo putting its boards into EMC servers and EMC, in turn, able to sell its own network storage under the Lenovo brand.

The agreement will be a powerful addition to revenue and earnings in the near term, given the rapid growth of the Chinese cloud-building market, but it does risk trouble in the longer term, as Lenovo learns how to get along without EMC.

But it was a certainty that would happen eventually, so EMC feels it's better-served taking the market opportunity now and dealing with the inevitable competition later.

Source: EMC Seeks Chinese Cloud Gold With Lenovo