Acquisition of the IBM PC business by Lenovo
| Company type | Public |
|---|---|
| Industry | Technology |
| Founded | November 1, 1984 in Beijing, China |
| Founder | Liu Chuanzhi |
| Headquarters | New York City , United States |
Area served | Worldwide |
| Products | Personal computers, servers, smartphones |
| Owner | Public shareholders |
| Website | www |
The purchase of IBM's Personal Systems Group, which managed its PC operations, by Lenovo was made public on December 7, 2004, and finalized on May 3, 2005.
Background
In response to a significant drop in profit margins caused by fierce pricing competition, IBM restructured its personal computer divisions outside the mainframe sector into an independent subsidiary named the IBM Personal Computer Company (IBM PC Co.) in September 1992. This reorganization was one of the most extensive corporate restructurings at that time. By 1993, the IBM PC Co. had further segmented into entities such as Ambra Computer Corporation and the IBM Power Personal Systems Group, which concentrated on clone PCs and PowerPC workstation development, respectively.
In 1998, IBM consolidated its enterprise-oriented Personal Systems Group with its Global Services division responsible for PC consulting and customer support, creating the IBM Personal Systems Group. By 1999, after experiencing substantial retail market share losses to competitors like Compaq and Dell, IBM exited the retail PC market and disbanded the IBM PC Co., fully absorbing it into the Personal Systems Group.
Separately, in September 2004, IBM and LG Corporation terminated their South Korean PC joint venture unrelated to earlier bribery concerns. This partnership had involved LG's Xnote laptop brand, which LG began marketing independently starting in 2012.
Acquisition
On December 7, 2004, Lenovo, a Chinese technology company, declared its plan to acquire IBM's Personal Systems Group through an all-stock transaction valued at $1.3 billion. After addressing initial national security reviews, both the Committee on Foreign Investment in the United States and the United States Department of Justice granted approval on March 9, 2005. The acquisition was completed on May 3, 2005, prompting Lenovo to shift its global headquarters from Beijing to New York City. By 2009, all Think-branded products were transitioned to carry the Lenovo name.
Beginning in 2006, Lenovo started reducing its association with the IBM brand. In 2007, IBM divested $85 million worth of Lenovo shares. Later that year in December, Lenovo employees marked "Lenovo Pride Day" by replacing IBM labels on their devices with Lenovo branding as a symbolic gesture.
Further developments
Lenovo expanded its enterprise hardware offerings in 2014 by acquiring IBM’s x86 server business (System x). Initially met with skepticism by some industry observers such as PC Mag columnist Tim Bajarin, Lenovo’s successful integration and retention of key personnel earned praise over time.
In a 2011 disclosure, former IBM CEO Samuel J. Palmisano explained that IBM strategically preferred Lenovo over Dell and private equity bidders due to alignment with China’s ambitions to globalize its corporations and strengthen IBM’s presence within the Chinese market.
See also
- List of mergers and acquisitions by IBM
- Acquisition of Sun Microsystems by Oracle Corporation
- Acquisition of Activision Blizzard by Microsoft