Outlines of IBM Lenovo deal emerge

Posted on 7 Dec 2004 at 12:17

IBM is set to take a stake of more than five per cent in Chinese manufacturer Lenovo as well as receive a cash payment of around $1.5 billion for its PC Division according to the Financial Times today.

It is understood the Lenovo would not only buy the development and distribution of the 'Think' range of desktops and notebooks - actual manufacture is already generally outsourced - but crucially also the brand name 'Think' itself along with the right to put the IBM brand on the machines. The branding would be a crucial guarantee of quality for conservative corporate buyers who might be wary of buying from a little known Chinese manufacturer despite the pedigree of the design.

By taking a stake in Lenovo, IBM will doubtless sell the deal not as a withdrawal from the PC business it created but as a joint venture.

Meanwhile, for the second day running, the Hong Kong-listed Lenovo has suspended share dealings. By way of explanation Lenovo released a statement saying that it was 'in confidential discussions with a major international company in the information technology industry in relation to a possible acquisition by the Company. Such discussions are at an advanced stage but no definitive agreement or letter of intent has yet been signed by the parties and there can be no assurance that any such agreement or letter of intent will be signed.'

Author: Steve Malone