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IBM Sells PC Unit to China's Lenovo

BEIJING/SAN FRANCISCO (Reuters) - China's largest personal computer maker, Lenovo Group Ltd. (0992.HK: Quote, Profile, Research) , said on Wednesday it is buying control of IBM's PC-making business for $1.25 billion, capping the U.S. tech giant's gradual withdrawal from the business it helped pioneer in 1981.

The agreement, which forms the world's third largest PC business, calls for Lenovo to pay IBM $650 million in cash, $600 million in Lenovo Group common stock and for Lenovo to assume $500 million in net balance sheet liabilities from IBM.

IBM (IBM.N: Quote, Profile, Research) will hold an 18.9 percent stake in Lenovo.

The deal closes an era for the world's largest computer company and kicks off a new age in which China's top PC maker Lenovo steps onto the world stage as a major PC brand and IBM partner.

The sale of IBM's PC desktop and notebook computer lines frees the company to focus on higher-margin businesses such as computer services, software, more powerful server computers, and storage as well as computer chips, analysts have said.

For Lenovo, which is battling intense competition in its home market, the deal with the world's largest computer company marks a breakthrough in its efforts to build its business overseas. It would also make the company part of a small but growing group of Chinese manufacturers buying overseas brands.

Lenovo will take ownership of IBM "Think" trademark family, including its ThinkPad notebook brand and its ThinkCenter desktop line. Lenovo will also buy out IBM's interest in its joint venture with Lenovo rival Great Wall Technology (0074.HK: Quote, Profile, Research) , China's No. 2 PC maker.

Lenovo will hire 10,000 IBM PC employees -- including about 2,300 in the United States -- mostly product designers, marketers and sales specialists -- and some 7,700 elsewhere, principally in China, where IBM operates a manufacturing joint venture.



http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=7022858