Lenovo Group Limited, a Personal Computer brand in China and across Asia has announced a definitive agreement under which Lenovo will acquire IBM's Personal Computing Division to form the world's third-largest PC business, bringing IBM's enterprise-class PC technologies to the consumer market and giving Lenovo global market reach beyond China and Asia.
Founded in 1984, Lenovo was the first company to introduce the home computer concept in the People's Republic of China, and since 1997 has been the leading PC brand in China and across Asia with annual revenues of approximately US$3 billion. IBM's PC business generated over US$9 billion in revenues in 2003 and offers a full range of desktop and notebook PC systems.
Lenovo will have combined annual PC revenue of approximately US$12 billion and volume of 11.9 million units, based on 2003 business results -- a fourfold increase in Lenovo's current PC business. Lenovo's new PC business will benefit from a worldwide distribution and sales network covering 160 countries, global brand recognition through the combination of IBM's "Think" brand notebook franchise and Lenovo's brand recognition in China.
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 be the preferred supplier of PCs to IBM, enabling IBM to offer a full range of personal computing solutions to its enterprise and small and medium business clients.
IBM will have an 18.9 percent ownership share in Lenovo Group and is expected to recognize a gain on the sale following completion of the transaction. There will be minimal financial impact resulting directly from the transaction to IBM's fourth-quarter 2004 results.
According to IDC figures for 2003, the combined unit market share of Lenovo and IBM's PC businesses worldwide is approximately 8 percent. The transaction will dramatically strengthen Lenovo's global presence in the fast-growing notebook PC marketplace.
As part of the strategic business alliance, IBM will provide marketing support and demand generation services for Lenovo products through IBM's existing enterprise sales force of approximately 30,000 professionals, and through IBM.com. Lenovo products will also be sold through IBM PC specialists that will join Lenovo. IBM Global Financing and IBM Global Services, the number one IT services organization in the world with powerful existing enterprise channels, will be preferred providers to Lenovo for leasing and financing services, and for warranty and maintenance services, respectively.
Lenovo Group will locate its PC business worldwide headquarters in New York, with principal operations in Beijing and Raleigh, North Carolina, and sales offices throughout the world.
Upon completion of the transaction, Lenovo will have approximately 19,000 employees. Approximately 10,000 current IBM employees -- more than 40 percent of whom already are in China and less than 25 percent of whom are in the United States -- will join Lenovo. The transaction is expected to have minimal impact in the aggregate on employment, benefits and compensation in either company.
The PC manufacturing portion of the International Information Products Company in Shenzhen, China, which is co-owned by IBM and Great Wall, is included in the transaction; IIPC's IBM eServer xSeries manufacturing there is excluded.
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