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Lenovo stock falls as IBM retreats

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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. ®

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