"Lenovo will pay $600 million in cash and $650 million in stock for the new business, the companies announced late yesterday. Lenovo will also take on about 10,000 IBM employees."
Hmm, I bet 2/3 of them will get laid off soon
IBM quits PC manufacturing in £900m deal
By Mike Verdin and Andrew Heavens
IBM has sold its computer making business to Lenovo Group, the Chinese technology company, in a $1.75 billion (£900 million) deal, signalling an exit from the PC market it helped create in the 1980s.
IBM said that the disposal, which will create the world's third-ranking PC manufacturer, would allow it to focus on the technology services market from which it has gained an increasing proportion of its profits.
"We have aggressively positioned IBM to be [a] provider of innovation-led solutions for businesses and institutions," Samuel Palmisano, the IBM chairman and chief executive, said.
When was the last time you saw a successful acquisition or merger in the computer industry?
Michael Dell, founder of Dell Computers, on the IBM sale to Lenovo
"The PC segment of the electronics industry continues to take on characteristics? which favour enormous economies of scale."
Lenovo, whose annual PC sales will quadruple to $12 billion, would fulfil an "unwavering goal" to become "truly nternational enterprise".
Yuanqing Yan, the Lenovo chief executive, said: "The development of the internet brings both great opportunities for the development of the PC industry and significant challenges.
"To succeed, PC companies need to have global scope, leading-edge technology and highly efficient operations."
Lenovo, which was founded 20 years ago by academics as a distributor of computer equipment, and which first operated out of a cottage, has grown into Asia's biggest computer maker, with a 27 per cent share of the Chinese market. The company gained a Hong Kong listing ten years ago.
However, even after today's acquisition, which will allow Lenovo to use the IBM brand, the company will claim only a 7.7 per cent share of the global PC market. Dell leads the market with a 16.7 per cent share with Hewlett-Packard claiming 15 per cent after the merger with Compaq, then the world leader, two years ago.
Dell yesterday signaled that it was ready to take advantage of any gap left by IBM's exit.
Before the deal was formerly announced, Michael Dell, the company's chairman and founder, used a speech at a conference in San Francisco to pour scorn on the prospects of any new company that might emerge from an IBM sale.
"We're not big fans of the idea of taking companies and smashing them together," Mr Dell said. "When was the last time you saw a successful acquisition or merger in the computer industry?
"It hasn't happened in a long, long time...I don't see this one as being all that different."
"If you look over the last few years, there has been a continuing trend of not only declines in market share but de-emphasis and divestiture of various assets of the small computer system business at IBM. It's pretty clear this is not the long-term strategic priority for IBM," he added.
"In our case, it's a different story. Last week, in stark contrast, we announced a brand-new computer manufacturing plant in North Carolina to support our growth in the US."
Lenovo will pay $600 million in cash and $650 million in stock for the new business, the companies announced late yesterday. Lenovo will also take on about 10,000 IBM employees.
IBM will take 18.9 percent equity stake in Lenovo in the deal which is expected to be completed in the second quarter of 2005.
http://business.timesonline.co.uk/ar...393706,00.html