Legend Computer
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.
Being a lazy b@astard, I'm gonna ask you a favor. Could you post information/links about flextronics? I'm not aware of the firm, but I find the idea intriguing (not troubling, yet).
And for the record, I see $40.00 CD players for sell all the time at drug stores and on the street. Basically they're no name units in a blister pack. IMHO we're about a year away from seeing the MP3 players selling for $50 or less. They're all memory and aside from switches, have no moving parts.
However, I don't agree with your point that India, Chinese, etc. programming of these cheap electronics is inevitable. The U.S. can and should compete in this area. We just have to get our act together. Education, education, education!
Wonderful!
Sure you will, with parts made in China. It is impossible to build a computer with parts made only in the USA.
Thanks! This is something I have a genuine interest in.
For the record, I don't believe the MSM is particularly lame, just cautious. And this is a story that won't be reported until late in the game, for a lot of reasons. However, the best reason is, you would first have to explain what a "commodity" is and what "commodification" of a product is. And then you'd have to explain that it really doesn't matter if you have "Intel Inside" or "AMD Inside." And then you'd have to explain "contract manufacturing" etc. etc. Plus, there are really no images to go along with this type of story.
That's probably the reason the story only appeared in the trade press, because the readers come to the story with a certain amount of pre-existing knowledge.
No, no, no. Education has to be a national priority, particularly science and technical education. Enough of the bitching and moaning about failing schools and unions and whether a kid gets to say prayers in class. It's all fiddling while Rome burns. (let the flaming begin).
We have to make education a national movement. And we have to do it the way we've done everything -- just jump into it, make a lot of mistakes and then, finally, get it right.
With chinese parts.
Yeah, but the executives will get a nice fat bonus.
"America always makes the right decision, after it's exhausted all other possibilities." -- Winston Churchill (slightly paraphrased)
The market is infallible, but the market is not American and it's not moral. And, to be perfectly frank, I don't care. What we need to do is hunt these kids out that have a proclivity and talent for science/technology. You're gonna find them in slums and suburbs and rural areas. You hunt them out and give them scholarships to first rate schools to develop their talents.
Now I'm gonna be called a "socialist" and a "Marxist" and maybe Ann Coulter will show up on my door and beat me about the head with a baseball bat as Rush pokes me with a pointy stick.
Yep, they're outsourcing as fast as they can.
Hey! Thats a manufacturing job dontcha'know!
"and maybe Ann Coulter will show up on my door"
Now youre talkin....Im sure Ann will be wearing an appropriate outfit too!
Kind of a cross between Mrs. Peel and Uma Thurman.
That's a good point.
If $800 toilet seats were bad I cannot imagine the cost of an office PC for government.
However there were news stories a year or two ago about efforts to limit foreigner contractors from working on certain federal contracts. The body shops that use H1B contractors and various advocacy groups raised so much hell that the plan was scraped or severely weakened.
"Kind of a cross between Mrs. Peel and Uma Thurman."
You nailed it!
Diana Rigg as Emma Peel...the pioneer and prototype for lots of women to follow.
Menza in tight leather pants. Add blonde hair...shaken but not stirred...
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