Chinese PC manufacturer Lenovo is in talks with IBM for the takeover of the server Division of the U.S. technology giant. The price of a possible deal could reach up to $4.5 billion, said a source familiar with the matter.
The server division could bring the IBM group between $2.5 and $4.5 billion, depending on the assets and liabilities that will be included in a future transaction. The deal will make Lenovo a major competitor for HP (NYSE:HPQ) and Dell (NASDAQ:DELL) on the server market.
After purchasing in 2005 the PC division from IBM, Lenovo became the second largest manufacturer of computers worldwide, and currently diversifies, by including in its product portfolio tablets and smartphones.
The Chinese group partnered with EMC Corp. last year to increase the sales of servers and storage for companies and the acquisition of the IBM server division would increase the capacity of Lenovo in this market.
“We don’t believe that the PC is dead. It’s still a very big business,” said Lenovo Chief Financial Officer, Wong Wai Ming, in a recent interview.
“But even so, Lenovo’s momentum in the PC business will be harder to sustain if the overall market continues to decline sharply, said Sanford C. Bernstein analyst Alberto Moel. He added that buying the server division from IBM “would definitely make sense strategically” as the margin in the PC market is very low.
Lenovo is globally ranked second on the PC market, behind Hewlett-Packard. Chinese manufacturer was one of the top 5 PC manufacturers that has not seen a drop in sales in the last quarter.
In the first quarter of 2013, Lenovo’s PC market share was up 15.3 percent compared to 13.2 percent a year earlier. HP’s market share dropped to 15.7 percent from 17.7 percent. Lenovo’s smartphone market share in China was 11 percent last year from 4.1 percent in 2011. Lenovo’s stock closed 9.5 percent up on Friday after the news.
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