IBM Sells PC Business for $1.75 Billion

IBM has officially confirmed it will sell its PC business to Chinese computer maker Lenovo for a total of $1.75 billion. Rumors about a potential deal swirled on Monday following a report stating the two companies were in talks.

Lenovo will pay IBM $650 million in cash, another $600 million in common stock, and assume $500 million in debt from Big Blue. IBM will become Lenovo's second largest shareholder with a stake of 18.9 percent in the company, and over 10,000 IBM employees will migrate to Lenovo.

The deal creates the third-largest PC company in the world behind Dell and Hewlett-Packard. Lenovo will receive a 5-year license to use the internationally recognized IBM brand name and "Think" trademarks on its desktop and notebook PCs.

Lenovo's new PC business will be located in the United States, with headquarters in New York and principal operations in Raleigh, North Carolina, where IBM currently handles PC development. Stephen Ward, current IBM senior vice president and general manager of IBM's Personal Systems Group, will become CEO of Lenovo. Current Lenovo CEO Yuanqing Yang will become Chairman of the company.

This is not the first time Lenovo, formerly known as Legend, has joined up with a technology giant across the Pacific. As first reported by BetaNews in 2001, Lenovo formed a joint venture with leading ISP America Online, but the initiative was eventually put on hold and operations ceased in late 2003 due to changing market conditions.

IBM will provide service and financing for Lenovo in a long-term strategic alliance. Lenovo PCs will be sold through current IBM sales channels, including IBM.com.

"IBM will continue to provide our clients with outstanding IBM- and Think-branded PCs through our alliance," said Stephen Ward. "And IBM will play an important role in the home and consumer markets by creating the advanced microprocessor and open software technology for the next-generation computing platform -- opportunities that play to IBM's unique innovation capabilities."

Following regulatory approval, the deal is expected to be completed in second quarter 2005.

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