Date
20 November 2017
2011 Consumer Electronics Show (CES)

The Big Picture: LENOVO DEAL

Lenovo Group Ltd. (00992.HK) has agreed to acquire the low-end server business of International Business Machines Corp. (IBM) for US$2.3 billion, in what is said to be the largest-ever overseas tech acquisition by a Chinese firm. The company will pay US$2.07 billion in cash plus 182 million of its shares for the deal, according to a regulatory filing Thursday. 

The Chinese PC maker hopes to maximize end-to-end capabilities to serve enterprise customers and explore new growth segments in the enterprise hardware market by acquiring IBM’s x86 server hardware and related maintenance service business. The deal offers assets and strategic relationships with IBM beyond servers, including areas such as storage, networking, software and services.

Lenovo sees rising demand for more computing power and a recovery in global enterprise spending to help the x86 server business. The deal will also enable the Chinese firm gain immediate scale and credibility in the market, creating an additional profit pool and fulfilling its “protect and attack” strategy.

Opportunities for cost savings in supply chain management, including procurement synergies from economies of scale, and sharing of best practices will be achieved through the deal, Lenovo said. The acquisition is also expected to enhance the company’s competitiveness by reducing operational costs.

The latest move marks another milestone for Lenovo in expanding its overseas business after its acquisition of IBM’s personal computer business in 2005, and shows that China can step up its presence in the global computing industry, observers say.

Of course, some people may argue that Lenovo may not be able to benefit much as the margin in server products is very thin. But if one looks at its previous experience, Lenovo has successfully used the IBM personal computer brand to boost reputation and sales, especially in the emerging markets. It is very likely that the company can optimize the IBM brand again this time to reap further gains.  

Alibaba, Yunfeng Fund take 54.3% stake in CITIC 21CN

Alibaba Group and Yunfeng Fund announced that they pumped US$170 million into CITIC 21CN Co. Ltd. (00241.HK), a subsidiary of CITIC Group, Shanghai Securities News reported Friday. Alibaba and Yunfeng, a private equity firm founded by Alibaba chairman Jack Ma, will hold a combined 54.3 percent stake in CITIC 21CN, an integrated information and content services provider. Alibaba will own 38.1 percent of the stock and Yunfeng 16.2 percent. The investment will help fund a pharmaceutical information business being developed by CITIC 21CN.

US developer bags Qianhai plot for 13.4 bln yuan

United States developer Silverstein Properties has won a land plot in Shenzhen’s Qianhai area for 13.4 billion yuan (US$2.21 billion), 21st Century Business Herald reported Friday, noting that the deal marks a record price for a land auction in the special financial zone. The 51,400 square meter plot, which can be developed into 477,000 square meters of buildable space, was the fifth to be auctioned off since July last year. The local government has made 40.7 billion yuan from such auctions. The Qianhai administration will offer another 10 sites this year. 

– Contact HKEJ at [email protected]

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