IBM announced today that Lenovo is to acquire its personal computing division. Lenovo is buying the PC business for US$1.75 billion, consisting of cash and equity. This will created the world’s third largest PC business with approximately US$12 billion annual revenue during 2003.
It’s not all one way traffic though with IBM taking an 18.9 per cent stake in the Lenovo Group. The deal will bring a long-term strategic alliance between Lenovo and IBM in PC sales, service and financing worldwide.
Lenovo Chairman, Liu Chuanzhi, and John Joyce, Senior Vice-President of IBM Global Services, exchange documents at a ceremony in Beijing.
If you’ve wondering how a company you’ve probably never heard of can afford to buy a major part of the company that created the PC, it’s because Lenovo is actually the biggest PC company in Asia. It changed its name earlier in 2004 from Legend. Legend was actually established in 1984 as an IBM PC distributor and it seems they like IBM so much, they bought the company. One of its better known brands in the UK is its QDI motherboards.
Lenovo will now be the preferred supplier of PCs to IBM, while IBM will be the preferred services and customer financing provider to Lenovo. The deal is a smart one for both companies as it enables Lenovo to gain a large slice of IBM PC sales revenue, while IBM’s 18.9 per cent of Lenovo will let them enjoy a slice of those PC profits and everything else Lenovo does.