IBM Set to Sell PC Business to Chinese Lenovo Group

IBM Goes Out of the PC Business

by Anton Shilov
12/06/2004 | 05:25 PM

IBM, the world’s No. 3 maker of PCs, and Lenovo, China’s largest maker of computers, are rumoured to announce the buy-out of IBM’s PC business unit along with appropriate brand-names for $1.5 billion in cash shares by the Chinese firm. The move will emphasize the tremendous strength Asia-based manufacturing firms gaining nowadays.

 

According to various media reports, IBM is talking to Lenovo and at least one another company over buy-out of the PC unit, the division that invented the PC as we know it today some three decades ago. Among other potential buyers for IBM’s PC unit Acer and Samsung Electronics are mentioned in addition to US buy-out groups, such Bain Capital or Thomas H Lee Partners. Along with the PC business, the buyer is likely to get IBM’s famous “Think” brand and the rights to use “IBM” brand-name on at least certain products. Lenovo is reported as the most likely purchaser of the business.

IBM has been pulling out of the PC business for some time now. In the late nineties the company ceased to sell its desktops in retail stores, in 2002 it announced huge PC outsourcing deal after selling its PC manufacturing fabs in North Carolina to Sanmina-SCI and spun off its storage division that was then acquired by Hitachi.

Whoever buys IBM’s PC unit, the strategy of this unit is likely to change drastically. While IBM is making the majority of profits from various enterprise-oriented services and products, companies like Lenovo and Acer are far more consumer-oriented. As a result of the strategy shift, the whole PC market’s landmark may change, as, in case the buyer is Lenovo, Acer or Samsung, they will be able to compete with industry giants Dell or HP on the US and EU markets, where Dell and HP historically have had very strong presence, not only in certain emerging markets.

The deal is expected to be announced already this week.