Doesn't sound like a good deal to the market either. The "outsourcing" business is about to run out of things to outsource.
Meanwhile we know what is going to happen to the remaining U.S. personnel of the IBM PC fabrications division.
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.
BTTT
Certainly does to the SELLER...
I have trouble figuring out exactly why I should buy a new cellphone. The new keypads are right-sized for my grandchild's fingers, and who the blazes needs pictures?
The PC and semiconductors are buggywhip industries. we don't need them, or their jobs. we have plenty of jobs here.
Actually, that sounds like a great brand name: "ChiCom Computers"
An eventuality which is contradicted by most of human history, but hey!! Enjoy the thought while you can...
More road signs for the moron free-traitors to read. As has been repeated over and over, they're not investing in our businesses anymore, they're buying them up. They have controlling interest in IBM now. How much more of our economy has to be subverted by China, India and Mexico before people do something. I got a pretty good idea.
Right. Away with these buggywhip industries like computers. They're only good for things like building businesses, national defense, weapons simulations, all that kind of useless stuff. We don't need that anymore. We can trust the Chinese and whoever else is out there not to blow us up.
Move on, yes. I hear Hardee's is coming out with a new Monster Thickburger. Plenty of burger-building jobs for those displaced EEs and system engineers.
That's why the Powers That Be are anxious to ship all manufacturing to the Far East. Ya need all that super cheap stuff in a Wal-Mart econonmy, since that's all your workers can afford.
We both say this, and get ridiculed for it:)
TRANSLATION:
IBM has Lenovo building it's PC computers for some years and Lenovo stole all the technology. IBM knew they would probably do this. So now Lenovo says they will build and sell under the IBM name and will pay IBM for that right. Lenovo reaps the profits as it sells PCs in Asia and the 3rd world.. eventually the US too.
And even if you price your time at $0, you will pay more than if you were to buy a "Dinkpad" from this new company.
Thank you for the informative post about "disruptive technology."
About your "free economy" comment. I believe that is is true that we do not recognize China as a free market economy.
Also Lenovo, like most (all?) major enterprises in Chins, is owned by one government entity or other which are controlled by the Party. That is, the major owners are Chi-com government lackeys of the Chinese Communist Party.
You ask, "What's going to happen when they encounter the inevitable recession, currency crisis, or whatever?"
Ans: another Great Leap onto the backs of tens of millions of their own citizens killing them as has been the wont of Chi-coms for more than fifty years.
Deng's Chi-com version of a new economic plan (NEP) changed nothing about the nature of communism. It only invited useful idiots like IBM managers to transfer their technology to the "people." to start up enterprises beginning years ago. IMO.
Now for the rest of the story.
Legend Group Holdings, which is controlled by the Chinese government, owns a majority stake in Lenovo. http://biz.yahoo.com/ic/56/56726.html
Gee, I wonder how long it will take the hyphenated groups to get out demanding that Lenovo be permitted to put their own people on contract to finish any defense contracts IBM has for their PC division.
IBM simply can't be trusted. This is further proof.
First they try to destroy the US-based UNIX software industry by building up the foreign clone Linux to replace all proprietary UNIX software. Now they're "selling" the most advanced PC hardware operations in the world straight to the Chicom government. Unfortunatley, many right here on this forum will continue to defend them, and personally attack folks like me who are concerned about what is happening right in broad daylight.
For those wondering where I've been the last few months, all three levels of my house suffered massive damage from a hurricane. We may finally finish repairs by January.
I have a friend who has been making his own desktops for ten years. Basically they cost about a third of what a similarly powered "store bought" costs and he enjoys it. He isn't an "over clocker" is anything like that, he just enjoys making them. And, he's gotten to the point where he can put one together in a couple of hours.
Like you said, off topic -- but it does show that computers are now commodities.
Very insightful take on the real story behind IBM's decision to formally sell their PC division to the ChiComs.
Doesn't sound like a good deal to the market either. The "outsourcing" business is about to run out of things to outsource.
Yea, with Chicom parts. Well the free traders will be happy, no more USA PCs, no more USA jobs making PCs, but PC's will be cheap ...... until the Chicoms pull the plug.
Doesn't sound like a good deal to the market either. The "outsourcing" business is about to run out of things to outsource.
Meanwhile we know what is going to happen to the remaining U.S. personnel of the IBM PC fabrications division.
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