China's Lenovo to buy IBM PC biz.
Tuesday, February 1 2005
New York -- China's Lenovo Group (lenovogrp.com) will buy IBM's PC business for $ 1.75 billion in cash and stock, plus the assumption of debt. With the acquisition, Lenovo would become the third-largest PC company in the world, with sales of $12 billion, said Lenovo chairman Liu Chuanzhihe. Levono will acquire an 81.1% stake, with IBM holding 18.9%.
The IBM division posted a first-half loss of $139 million on sales of $5.2 billion. Since 2001, the unit has lost nearly $1 billion. More than half of its products are manufactured through an unspecified joint venture--likely Great Wall Technology.
IBM is currently the third largest maker of PCs, behind Dell (16.4%) and HP (13.9%). The merged company will have an 8% share of the global PC market.
Stephen M. Ward, Jr., currently IBM senior vice president and general manager of IBM's Personal Systems Group, will serve as the chief executive of Lenovo when the deal closes. Yuanqing Yang, currently vice chairman, president and chief executive of Lenovo, will become chairman of Lenovo.
Lenovo, China's biggest computer maker, claiming a 27% share, is traded publicly on the Hong Kong exchange.
Deutsche Bank (db.com) analyst Chris Whitmore said Sanmina-SCI (sanminasci.com) generates about 20% of its revenue from building PCBs for IBM, and could lose up to $50 million in annual operating profits if Lenovo were to end that supply deal.
Edited by Mike Buetow