Lenovo will pay USD 2.07 billion in cash and the rest with stock of the Beijing-based PC maker, the company said in a statement to the Hong Kong exchange on Thursday. (Agencies)
The deal surpasses Baidu Inc's acquisition of 91 Wireless from NetDragon Websoft Inc for USD 1.85 billion last year, according to Thomson Reuters data, and underscores the growing clout of the country's technology firms as they look to expand overseas.
The acquisition will allow Lenovo to diversify revenue away from the shrinking PC business and remodel itself as a growing force in mobile devices and data storage servers. Analysts said Lenovo will likely find it easier than International Business Machines (IBM) to sell the x86 servers to Chinese companies as Beijing tries to localise its IT purchases in the wake of revelations about U.S. surveillance.
The sale allows IBM to dump its low-margin x86 business -which sells less powerful and slower servers than the company's higher-margin offerings - and focus on the firm's decade-long shift to more profitable software and services. The unit had reported seven straight quarters of declining revenue.
"What the business is worth to IBM is no longer relevant. The only thing that matters is what it's worth to Lenovo," said Alberto Moel, a Hong Kong-based analyst at Sanford C. Bernstein. "If Lenovo can improve the margins... that could offset any continued revenue shrinkage."
Lenovo's purchase of IBM's ThinkPad PC business in 2005 for USD 1.75 billion became the springboard for its leap to the top of global PC maker rankings. The market is betting Lenovo will enjoy similar success with its latest acquisition, which is partly reflected in a 9.44 percent rise in its shares this year.
Credit Suisse and Goldman Sachs advised Lenovo, PC maker said in its statement.
Lenovo will pay USD 2.07 billion in cash and the rest with stock of the Beijing-based PC maker, the company said in a statement to the Hong Kong exchange on Thursday.