Lenovo Completes Purchase of IBMs PC Business

The two companies announce the closing of the deal, which creates the third largest PC vendor in the world.

Lenovo Group Ltd. has completed the $1.75 billion purchase of IBMs PC business.

The two companies announced the closing of the deal Sunday. The purchase creates the third largest PC vendor in the world—with $13 billion in revenue and 14 million units shipped—trailing Dell Inc. and Hewlett-Packard Co., and gives IBM greater access to the emerging Chinese market.

"Lenovo is well-positioned, with competitive strengths in branding, world-class scale and industry-leading efficiency," Stephen Ward, former vice president and general manager for IBMs PC group and now CEO of Lenovo, said in a prepared statement. "Lenovos leading [research and development] and product differentiation capabilities, experienced management team and global distribution network—through our unique alliance with IBM—give us a powerful competitive position in global markets."

Ward said Lenovo will begin rolling out new products within the next few weeks.

The relationship between Lenovo and IBM will be key going forward. Lenovo, which is moving its global headquarters from Beijing to IBMs hometown of Armonk, N.Y., will continue to sell desktops and notebooks with the Think Centre and ThinkPad names. In addition, the bulk of executives will come from IBM, and about 10,000—including researchers, salespeople and executives—of Lenovos 19,000 employees will be IBM workers. IBM also took a 18.9 percent stake in the new Lenovo.

/zimages/4/28571.gifThe Lenovo/IBM offshoot could claim a good share of the corporate market. Click here to read more.

The deal for IBMs Personal Computing Division will enable Lenovo to move beyond the Chinese market and onto the global stage. For IBM, the partnership means greater access to a Chinese market expected to grow rapidly over the next few years. It also enables IBM to unload its low-margin PC business, but continue to make money through sales, support and services.

In a memorandum sent to employees of IBMs Personal Systems Group in December, CEO Sam Palmisano said the PC business no longer fit in with the companys on-demand strategy.

Lenovos new chairman said the deal creates "a new era for the global PC industry."

"The new Lenovos strategy is based on what our customers want: high-quality products and world-class service," Yuanqing Yang, chairman of Lenovo, said in a statement. "We are committed to delivering the highest quality, most innovative PC products and services to our customers, to providing the best working environment for our employees, and to creating value for our shareholders."

In January, the deal caught the attention of federal regulators concerned about what technology would be transferred to the Chinese company, and whether Chinese nationals could use IBMs facility in Raleigh, N.C., for purposes of industrial espionage. However, the Committee on Foreign Investments in the United States OKd the deal in March.

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