Reports that IBM is to sell a majority stake of its PC business to China’s biggest computer maker Lenovo Group have been officially confirmed.
The deal, which is worth $1.75 billion, will see IBM retain an 18.9 per cent share of the newly-merged company. About 9,500 IBM staff will become employees of the new venture, doubling Lenovo’s existing workforce.
Stephen Ward, SVP and general manager of IBM’s Personal Systems Group, will serve as CEO of Lenovo following completion of the transaction. Yuanqing Yang, currently vice chairman and president/ CEO of Lenovo, will remain as chairman.
Commenting on the deal, IBM SVP John Joyce said: "The IBM brand will gain great recognition in China, now the world’s fastest growing economy and fastest growing market for PCs.
"For employees, this represents an opportunity to join a vibrant and growing company, and for investors this agreement represents an opportunity to reap the rewards of a growing company in a growing market."
The news came just days after analyst group Gartner released a report stating that three of the top ten PC manufacturers could be forced to abandon the space "if their drag on margins and profitability are deemed too great by their parent companies".
The analyst group also predicted that the demise of the PC replacement cycle and the effect of emerging markets would lead to increasingly aggressive price competition among PC manufacturers and force them to consolidate and diversify into related markets. (see ‘the big squeeze’, page 38)