Lenovo stock falls as IBM retreats
Falling market share
Lenovo saw shares fall more than five per cent today following a sale of the PC maker's shares.
JP Morgan analysts downgraded the company to neutral from overweight, citing sluggish revenue growth from weak customer demand in China and the US.
The downgrade came after IBM yesterday sold off 116.19 million shares worth $77.3m at HK$5.19 each - about a 1.3 per cent stake in Lenovo, according to a Reuters report.
This is IBM's latest stake sell-off. In April, it sold $83.6m worth of Lenovo shares at HK$5.61 each.
The company acquired its stake in Lenovo at HK$2.675 a share in 2005 after the Chinese firm bought its struggling PC unit for $1.25bn and the assumption of debt. Since then the US tech giant has gradually sold tranches as lock-up periods have expired.
In a 2004 US Securities and Exchange Commission filing in late 2004, IBM that its ailing PC biz had seen “a history of recurring losses, negative working capital and an accumulated deficit," it said. "The ability to settle obligations as they come due is dependent on IBM funding the operations on an ongoing basis."
Lenovo was effectively saddled with a business that had suffered nearly $1bn in losses in the three years leading up to the acquisition in 2005.
Shares in Lenovo were set to open at HK$5.3 today, compared with a previous close of HK$5.58. ®
COMMENTS
Non China made laptop
I don't think there are any,but perhaps Korea , Formosa (can't spell the other name), or Vietnam may make some . Certainly none in USA.
Tank, Sell, Bottom out, Buy, Restore.
So Thinkpad is a pretty solid name. I say ThinkPad, you think IBM... IBM sells the Thinkpad line to Lenovo for some exorborant price. Lenovo tanks, and IBM dumps the shares they have as soon as they can, and whatever loss they have to absorb. Then when Lenovo hits Rock Bottom, and no one wants the name, IBM steps back in, and buys out the company, for peanuts on the dollar, taking back the ThinkPad name, that was always associated with IBM anyhow. They restore the ThinkPad name, and make a killing. Another few billion pesos in Big Blue's coffers.
Gates of Hell, cause he's not the only business cut-throat.
re: They'll pull through
Indeed, investors are just a little nervous right now, so they say "better safe than sorry" when they see news that IBM is offloading Lenovo shares. In time, investors are likely to buy Lenovo shares again and the share price should then rebounce.
They'll pull through
There are still staff to lay off :-/
Mine's the one with the expired Lenovo security badge in the pocket
