In a move that looks set to usher in a new era in the PC business, industry giant IBM has agreed a deal to sell its personal computing division to Chinese manufacturer Lenovo. Due for completion in the second quarter of 2005 the deal will see IBM receive a total of $1.25 billion in cash and an 18.9 per cent stake in China’s largest PC maker. The two companies will also form a partnership in which IBM will become Lenovo’s preferred services and customer financing provider, and Lenovo in turn will become IBM’s preferred supplier of personal computers for its clients.
On completion of the sale Lenovo will become the world’s third largest PC supplier, with expected revenues of $12 billion. The company will move its global headquarters from Beijing to New York and IBM’s senior vice president and general manager of the personal systems group, Steven M. Ward will become Lenovo’s new chief executive officer.
IBM ceo Samuel Palmisano said “In Lenovo we have a partner with powerful competitive capabilities in China and Asia and in consumer and desktop PCs. We have worked very carefully with Lenovo to put in place all the elements of a strong, successful, enduring global alliance.”
Industry analysts were upbeat about the deal, in a statement Gartner said that the deal made sense for both companies, producing a stronger competitor to Dell, which would ultimately put downward pressure on PC prices. The firm advised IBM buyers to “Use the potential risks of the deal to negotiate lower prices or better service levels from IBM” But also cautioned that customers should be ready to switch suppliers if IBM’s responsiveness to problems drops.
Unsurprisingly, desktop market leader Dell had little positive to say about the deal, speaking at a conference in the US Michael Dell said “We’re not big fans of taking companies and smashing them together. When was the last time you saw a successful acquisition or merger in the computer industry? It hasn’t happened, at least not in a long, long time.”