Lenovo completes buy of IBM's PC business

Lenovo completes buy of IBM's PC business

Summary: The $1.75 billion deal creates the world's third-largest PC maker, trailing only Dell and Hewlett-Packard in sales.

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TOPICS: Mobility
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China's Lenovo Group has completed its $1.75 billion purchase of IBM's PC division, creating the world's third-largest PC maker, the companies said Sunday.

"Within weeks, we will be introducing new products as the new Lenovo," Stephen Ward, Lenovo's chief executive officer, said in a statement.

Lenovo Chairman Yang Yuanqing called the purchase a "historic event" for the company.

Under the deal, IBM takes an 18.9 percent stake in Lenovo. Lenovo paid $1.25 billion for the IBM PC unit and assumed debt, which brought the total cost to $1.75 billion.

Based on both companies' 2003 sales figures, the joint venture will have an annual sales volume of 11.9 million units and revenue of $12 billion, increasing Lenovo's current PC business fourfold. Lenovo trails only Dell and Hewlett-Packard in sales.

Lenovo will be the preferred supplier of PCs to IBM and will be allowed to use the IBM brand for five years under an agreement that includes the "Think" brand. Big Blue has promised to support the PC maker with marketing via its corporate sales force.

The deal, which was announced in December 2004, has come under regulatory scrutiny. The Committee on Foreign Investments in the United States, which reviews acquisitions of U.S. businesses by companies based outside the country, has reportedly showed concern that Chinese operatives might use an IBM facility for industrial espionage.

However, the Federal Trade Commission indicated in January that it would not raise any objections to the Lenovo deal on the basis of how the sale might affect competition in the market.

The combined venture will have roughly 10,000 IBM employees and 9,200 Lenovo employees. It will be based in New York, with operations in Beijing and in Raleigh, N.C.

Topic: Mobility

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