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IBM sells PC biz to China

Notebooks, PCs in five-year franchise

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So, it's true. IBM, creator of the original PC in 1981, has sold its computer business to Chinese assembler Lenovo, formerly the Legend Group. Lenovo will pay Big Blue $1.25bn, with $650m in cash, and IBM will retain an 18.9 per cent stake in the joint venture. Lenovo will be IBM's preferred supplier and retains the right to use the brand for five years. The deal excludes IBM's eServer x86 PC servers.

IBM's chief executive Sam Palmisano cited economies of scale, explaining in a release that the consumer PC market was increasingly resembling the consumer electronics business, and that the deal would help maintain IBM's focus on business computing.

The deal has huge symbolic significance, far greater than IBM's five per cent market share suggests. IBM's stake in the largest Chinese PC OEM could prove to be one of its better investments, as the domestic market in the PRC has the most promising potential for growth: the government has vowed to urbanize a billion citizens over the next decade.

Originally the deal was rumored to exclude IBM's notebook line - and forum members over at Bill Morrow's Thinkpads.com site were anxious that the Thinkpad line maintains its stellar reputation for build quality and reliability - not to mention documentation and parts support. "I'm a diehard Mac fan but the IBM Thinkpad is the only PC I will buy," wrote one, when the rumors surfaced last week. Lenovo has next to no R&D experience at present. Thinkpad is undoubtedly a stronger brand than the one Lenovo produced last year.

The joint venture will be headed from New York with major offices in Raleigh, North Carolina and Beijing. Stephen Ward, the Personal Systems Group director at Big Blue, will be the operation's founding CEO. Yuanqing Yang, Lenovo's current President and CEO, will become chairman of Lenovo if the deal closes as expected in the second quarter of next year.

Lenovo expects to have close to 19,000 staffers at the close of the deal with 10,000 of these workers - 40 per cent of which are in China and 25 percent in the US - coming from IBM. ®

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