Posted on 12/07/2004 6:32:06 PM PST by Tumbleweed_Connection
China's biggest computer maker, Lenovo Group, said Wednesday it has acquired a majority stake in International Business Machines Corp.'s personal computer business for $1.25 billion, one of the biggest Chinese overseas acquisitions ever.
The deal shifts IBM to a peripheral role in a corner of the technology industry it pioneered.
It creates a joint venture in which Lenovo Group Ltd. takes over the IBM-brand personal computer business, including research and development and manufacturing, while IBM will keep an 18.5 percent stake in the company, said Lenovo's chairman, Liu Chuanzhi.
The deal makes Lenovo the third-largest PC company in the world, he said.
Like other major Chinese manufacturers hoping to expand overseas, Lenovo is planning to leverage a well-known foreign brand name. Liu said the company would be entitled to freely use IBM's brand name in five years' time.
IBM's computer unit had sales of nearly $13 billion over 12 months ended in September.
Lenovo, founded in 1984 by a group of scholars at the government-backed Chinese Academy of Sciences in Beijing, is China's biggest computer maker and is also the biggest in Asia. Its shares are traded in Hong Kong.
The announcement Wednesday followed reports that a deal was imminent. On Tuesday, Lenovo's Hong Kong unit confirmed it was in talks with a "major international company in the information technology business" but hadn't named the company, saying the negotiations were confidential.
"The bigger the baby, the more difficult the delivery," Liu quipped when asked about the delay in making a formal announcement.
With speculation about the impending deal mounting, IBM's stock fell $1.57 per share to $96.10 in Tuesday's trading on the New York Stock Exchange.
Both IBM and Lenovo have been grappling with the difficulties of turning a profit on PCs, a business that has suffered steep price declines over the past decade thanks to aggressive competition from Dell and upstarts such as eMachines Inc., which was acquired earlier this year by Gateway Inc.
Once a key player in popularizing the personal computer, IBM is now increasing its focus on consulting, outsourcing and software, analysts say.
Its PC business now accounts for a small portion of its total sales and profits, according to analysts. It ranks a distant third in terms of PC units sold, having surrendered the market lead by the late 1990s, according to the technology research firm Gartner Inc.
Globally, IBM sold 6.8 million PCs in the first nine months of 2004 for a 5 percent market share, Gartner said. That compares with 16.4 percent for Dell Inc. and 13.9 percent for Hewlett-Packard Inc., which makes both the HP and Compaq brands.
The companies expect that by combining operations, they'll be able to save money on manufacturing and expand their razor-thin profit margins.
Lenovo faces increased competition at home and in Asia from foreign companies such as Dell. The Beijing-based company, formerly known as Legend, had expanded into cell phone manufacturing and information technology services, with lackluster results. It now says it is focusing on its core computer business again.
IBM was not the first technology company to sell a computer small enough to sit on a desk or table. But it did popularize the idea of a "personal" computer for the mass market with the 1981 introduction of a desktop machine featuring a more user-friendly operating system, a software platform licensed from a then-fledgling company named Microsoft Corp.
IBM, based in Armonk, N.Y., has nearly 320,000 employees.
Luckily...some wise associates of mine forsaw the future outsourcing problem we now have today before I got out of college in 1996. Their advice...take a slight cut in pay, ignore the bureaucracy and politics and get a job with the government...if you can't beat'em...join'em. Fortunately, newer employees in GS-9 and higher positions (present company included) actually are grateful for their jobs, seek to be a benefit to the taxpayer and exhibit a much better work ethic than what is known as the "typical government employees" or "lifers".
There was a certain bookstore in Manhattan where I used to see Diana Rigg on a fairly regular basis, maybe once or twice a year. One time she came in and Kurt Vonnegut was there -- and I thought, "Man this is gonna be great!" -- but they didn't seem to notice each other.
Just keep in mind that Chinese firms are exempt from the Kyoto Treaty, whereas American firms in Kyoto countries are not exempt.
By selling their PC manufacturing to the Chinese, IBM escapes environmental lawsuits that would have hit all of their offshore manufacturing facilities when Kyoto goes into effect on February 16.
I thank you sir. That is my speculation and I would bet more than 60% accurate.
Strand.
Gotham Book Mart
Have you ever heard the real estate business referred to as the real estate industry? I have. Many times.
Gotham Book Mart....
Never been there and I live far away from the belly of the beast these days. Not dissing the place, so please don't let me be misunderstood
who can sue a US company with a plant in china, over Kyoto? when neither country has signed the treaty?
China has signed Kyoto. So has India. Kyoto makes China and India exempt, however.
Not so for American firms doing business there...
With Chinese parts.
Untrue. Make that all Asian parts. I only go home built because I'm a cheap bastard. My beautiful Microstar K7N2G motherboard is made in ChiCom land but my (admittedly old) floppy is made in Taiwan. Western Digitals made in Malaysia and Thailand....
My AMD processor is not made in China. They have fabs in Taiwan and Germany
but who has standing to sue the US companies in china? The Euros? China?
Hear, hear!
Where? Where?
:-)
No, I was just agreeing that as a society we need to recast education as today's Arsenal of Democracy, just as we did American heavy industry in the 1940s.
"There was a certain bookstore in Manhattan where I used to see Diana Rigg on a fairly regular basis, maybe once or twice a year."
Sounds like a cut above your average Barnes and Noble!
One great bookstore Ive been in was Keplers out in Palo Alto. Another is out in West Chester PA...Chesapeake Book and Music. For folks down in MD...the Barnes and Noble in Annapolis is pretty good too.
One of these days....my friend and I are planning a trip up to New York to the Metropolitan Museum. Dont know what the parking is like these days on Sunday afternoons. We used to just park out on the street.
I always wondered where...maybe I can get a villa next to a canning operation..
For the record, although this thread focuses on electronics, chemistry is another area where our intellectual capital should be protected.
I don't know, I guess the people who work in those fields, assuming they are good and ethical employees, are industrious, work at their jobs with some measure of honesty, put in a decent day's work for their pay. It just doesn't fit the image of low-tech, blue-collar industry that oldsters like me tend to associate with the term.
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