|Lenovo Chairman Liu Chuanzhi (L) shakes
hands with John Joyce, Senior Vice-President & Group Executive of IBM
Global Services, at a ceremony in Beijing December 8, 2004. Lenovo
Group Ltd. said it is buying control of IBM's PC-making business for
US$ 1.25 billion, capping the U.S. tech giant's gradual withdrawal from
the business it helped pioneer in 1981. (Photo:
|Lenovo Chairman Liu Chuanzhi (L) exchanges
documents with John Joyce, Senior Vice-President & Group Executive of
IBM Global Services, at a ceremony in Beijing December 8, 2004. (Photo:
BEIJING, Dec. 8 (Xinhuanet) -- China's personal
computer giant Lenovo Group Limited Wednesday signed an agreement with IBM to
take over the latter's personal computer business for 1.25 billionUS dollars.
According to the agreement, Lenovo will acquire IBM's
entire global desktop and laptop computer research and development and
manufacturing business. In return, Lenovo will pay IBM 650 millionUS dollars in
cash and grant it 600 million US dollars worth of Lenovo stocks, which will make
IBM an owner of around 18.5 percentof Lenovo's equity stake.
After the transaction is completed, Lenovo Holdings
will keep around 45 percent equity stake of Lenovo Group Limited, which is
listed on the Stock Exchange of Hong Kong and has American Depositary Receipts
traded in the United States.
"The purchase will make Lenovo Group the third
largest PC makerworldwide with an annual revenue exceeding 10 billion US
dollars,"Lenovo Chairman Liu Chuanzhi said after signing the agreement along
with IBM vice president John Joyce.
After the transaction, the volume of Lenovo's PC
business will reach 11.9 million units, based on its 2003 results, a fourfold
increase in Lenovo's current PC business. As a result, it will account for 8
percent of the world market share, says an IBM pressrelease carried on its
"Through acquiring IBM's global PC business and
forming a strategic alliance with IBM, Lenovo would absorb and integrate
theskills from both sides and acquire global brand recognition, an international
and diversified customer base, a world-class distribution network with global
reach, more diversified product offerings, enhanced operational excellence and
leading-edge technology," said Yang Yuanqing, currently Lenovo vice chairman,
president and chief executive officer.
He added that the transaction would also help
establish Lenovo's international name recognition by leveraging IBM's powerful
global brand thorough a five-year brand licensing agreement as well through
ownership of the globally-recognized "Think" family of trademarks.
Lenovo's new PC business is expected to benefit from
IBM's worldwide distribution and sales network covering 160 countries.
For IBM, the transaction would further consolidate
its presencein the world's fastest growing IT market through holding a
significant stake in China's largest PC maker.
As part of the transaction, Lenovo and IBM will enter
a broad-based, strategic alliance in which IBM will be the preferred services
and customer financing provider to Lenovo. Lenovo will bethe preferred supplier
of PCs to IBM, enabling IBM to offer a fullrange of personal computing solutions
to its enterprise and small and medium business clients.
Stephen M. Ward, Jr., currently IBM senior vice
president and general manager of IBM's Personal Systems Group, will serve as
thechief executive officer of Lenovo following completion of the transaction,
expected in the second quarter of 2005. Yang Yuanqingwill take over the Lenovo
chairmanship from Lenovo's founding father Liu Chuanzhi.
Lenovo Group will locate its PC business worldwide
headquartersin New York, with principal operations in Beijing and Raleigh, North
Carolina, and sales offices throughout the world, according to company sources.
After the deal, Lenovo will have some 19,000
employees. About 10,000 current IBM PC division employees, more than 40 percent
of whom already are in China and less than 25 percent in the United States, will
Lenovo commanded a 27 percent share of China's PC
market in 2003 and Lenovo PCs ranked the number one in the Asia Pacific
(excluding Japan) with a share of 12.6 percent in 2003. Enditem