8 December 2004 IBM has confirmed the sale of its PC business to Chinese manufacturer Lenovo, for $1.75 billion (£900 million) in a cash and stock deal.
This marks the end of IBM's involvement in the PC market it helped to create, while potentially ushering in a even more cut-throat global market.
Under the terms of the deal, which is expected to close in the first half of 2005, Levono will pay $1.25 billion for IBM's PC unit. It will also take on the unit's debt, making the total value $1.75 billion. IBM will also take an 18.9% share in Lenovo for a minimum of three years.
IBM has long struggled to make money from its PC business, and says it will concentrate in future on corporate systems, such as its server range.
The deal will also springboard Levono into third place in the PC market, although it will remain some distance behind both Dell and HP. But importantly, Levono sees the deal as giving it the necessary "global scope" to compete in global markets, said president Yuanqing Yan.
Levono has established a 27% share of the burgeoning Chinese market, where it has managed to hold its own against global leader Dell, primarily through having a low cost base that allows it to compete with Dell on price – something other US-based manufacturers have found tough.
But Dell claims to be untroubled by the deal. Speaking at database giant Oracle's user conference in San Francisco, Dell chairman, Michael Dell said: "We're not a big fan of taking companies and smashing them together. When was the last time you saw a successful acquisition in the computer industry?"
