China’s Lenovo buys IBM’s PC business

Lenovo Group and IBM have closed a ground-breaking deal in which China's largest computer company acquired IBM's personal computer business.

The deal shows the ambition of Chinese firms to become global brands.

The agreement, first announced on December 8, had to overcome resistance from United States regulators because of Lenovo's ties to the Chinese Government.

It calls for Lenovo to pay IBM US$1.25 billion ($1.73 billion) in cash and stock and assume US$500 million of IBM debt.

IBM said in a statement issued by the companies that it would take a pre-tax gain of about US$1 billion when it reported its second-quarter earnings results in July.

The combined company brings together Lenovo, which sells roughly one-third of PCs in China, and IBM, whose ThinkPad is popular with business users worldwide, forming the world's third-largest PC maker.

The new Lenovo must fuse executive teams from China and the US and move its headquarters to New York from Beijing while it seeks to show that Chinese companies can produce and sell world-class products, not just make low-cost PCs.

"We will increase the pace, not slow down the pace, of innovation and quality," said Stephen Ward, Lenovo's new chief executive and the former head of IBM's PC business.

The deal catapults, Lenovo, little-known outside China, into a global market where it faces bruising competition from PC industry pacesetter Dell and rival Hewlett-Packard.

There are also a host of established Japanese names plus Taiwanese upstarts, which are expanding into North American, European and other markets.

- REUTERS