Lenovo to get IBM PCD resellers

Lenovo is set to inherit IBM's PC business partners in its US$1.75 billion purchase of a major share in IBM's Personal Computing Division (PCD) – a deal that has made the Chinese vendor the world's third-largest PC business.

Caspian Smith, public relations head at IBM Australia, said Lenovo was keen to acquire a PC channel in Australia – giving Lenovo a long-awaited decent chunk of the Australian market for US$1.25 billion in commercial and equity plus US$500,000 in liabilities.

IBM PCD's current business partner relationships would probably transfer – along with up to 180 local staff and the rest of the division – to Lenovo, he said.

Lenovo had no staff based in Australia, so that would likely include PC channel man Phil Cameron, while the Lenovo division would be led by the current general manager of IBM PCD, Alan Munro, Smith said.

“He'll continue to lead the business,” Smith said. “Lenovo will offer roles to everyone in PCD.”

However, for IBM PCD and its business partners it would be business as usual for the meantime.

The deal wouldn't be finalised until the second quarter of 2005, and IBM and Lenovo had taken steps to smooth over the transition from one company and brand to another, he said.

“Basically, none of our programs with our business partners are going to change at the moment,” Smith said. “And Lenovo will obviously have a similar relationship with our business partners here.”

Although some renegotiation might be needed, resellers could look forward generally to having the same PC contacts locally, he said.

“[But] partners will have a new IBM contact for the remaining Intel-based product they can sell, our x-series servers for example,” Smith said.

IBM PC brands ThinkPad and ThinkCentre would go over to Lenovo, but the current product roadmap would be maintained for the next 18 months, he said.

“And then, for five years we're going to have a material agreement with Lenovo, that IBM uses Lenovo as preferred PC supplier,” Smith said.

Lenovo would also continue to use IBM for warranty, IT services and finance for five years. Lenovo was also taking R&D, customer care and marketing, he added.

“We want to maintain our relationship with our clients wherever we can offer an end-to-end solution and we will continue to have the strategic alliance there with Lenovo,” Smith said.

Lenovo was focused on PCs globally, whereas IBM would now concentrate on its other infrastructure offerings and services. “So it also gives us more focus for what we are doing,” he said.

The deal, formally announced 7 December in the US and China, made Lenovo the world's third-largest PC business with some US$12 billion in annual revenue – and volume of about 11.9 million units - for 2004. The deal quadruples Lenovo's current PC business.

IBM took 18.9 percent equity in Lenovo as part of the deal. IBM will now be Lenovo's second largest shareholder. Lenovo will fund the cash part of its consideration through internal cash and debt. Equity will be issued at 2.675 Hong Kong dollars per share, the companies said in a statement.

Global Lenovo headquarters would be New York, but the main operations would be based in Beijing and the US state of North Carolina. The deal gives Lenovo a global distribution and sales network across 160 countries and global brand recognition, the companies said.

Chuanzhi Liu, chairman of Lenovo Group, said the deal was a breakthrough in the company's drive for global success. “Since the beginning, however, our unwavering goal has been to create a truly international enterprise,” he said.

Lenovo was founded in 1984 and is believed to be the first company to bring home computers to China. Since 1997, it has claimed a place as China's leading PC brand and across Asia, with revenues of around US$3 billion.

IDC analysis has suggested that the combined unit market share of Lenovo's and IBM's PC businesses globally will be about eight percent. The new Lenovo business is expected to have about 19,000 staff worldwide, including 10,000 current IBM staffers.