China-based Lenovo Group became the third largest PC maker in the world today after the company finalized its acquisition of IBM's PC business. The $1.25 billion purchase makes Lenovo the first Chinese company to have a truly global reach, and the company pledges to move quickly to introduce new products in the coming weeks.
"The closing of this transaction is an historic event for Lenovo and marks a new era for the global PC industry," Lenovo Chairman Yuanqing Yang said. "The new Lenovo's strategy is based on what our customers want: high-quality products and world-class service. We are committed to delivering the highest quality, most innovative PC products and services to our customers, to providing the best working environment for our employees, and to creating value for our shareholders."
After the US Congress raised questions about the deal earlier this year, the Committee on Foreign Investments in the United States (CFIUS) investigated the Lenovo purchase to ensure that it didn't raise any national security concerns, such as Lenovo's partial ownership by the Chinese government. CFIUS closed its review in March without finding any problems with the deal, however.
According to Lenovo statements, the purchase includes about $650 million in cash and $600 million in stock, giving IBM 18.9 percent of Lenovo. In addition, Lenovo will assume $500 million of IBM's financial liabilities. The new Lenovo management team is comprised of officials from both companies, and the company will be situated in new headquarters in Purchase, New York. The company will also maintain operations in Beijing and Raleigh, North Carolina, and research and development centers in Beijing, Chengdu, Shanghai, Shenzhen, and Xiamen, China; Tokyo, Japan; and Raleigh. The company now employs more than 19,000 people worldwide.
According to Lenovo, the new company expects to have annual revenues of about $13 billion. In 2004, IBM owned 5 percent of the PC market, selling almost 7 million units. Only Dell (16.4 percent) and HP (13.9 percent) own larger shares of the PC market.