BIZCHINA / Top Biz News |
IBM eyes Lenovo stake sale to ride on rally(Shanghai Daily)Updated: 2007-05-09 13:53 International Business Machines Corp is seeking to sell 223 million shares in Lenovo Group Ltd, the world's third-largest personal-computer maker, for as much as HK$669 million (US$86 million), a sale document showed. IBM, the world's largest computer-services company, wants to sell the shares for between HK$2.92 and HK$3 each, a discount of as much as 6.7 percent to Lenovo's closing price in Hong Kong yesterday, according to an e-mail sent to investors. IBM, based in Armonk, New York, is taking advantage of a rally in Lenovo shares as it sells units including personal computers to focus on more profitable areas such as software and computer services. Before yesterday, Lenovo's stock has surged 38 percent since May 26 last year, when IBM was first allowed to sell part of its stake, Bloomberg News said. The Chinese company moved its headquarters to Raleigh, North Carolina after buying IBM's PC unit in May 2005 for US$1.25 billion in cash and stock. IBM received an 18.9 percent stake in Lenovo as part of the purchase. The two companies agreed last year to let IBM sell its stake earlier than previously arranged. Under the new deal, the US company was allowed to dispose of as much as two-thirds of its stake from May 25 last year, and the remainder from November 1, 2007. Under the original deal, IBM could only sell one-third of the shares from May 1, 2006, two-thirds the following year, and the rest from May 1, 2008. Lenovo said last month that it plans to cut 1,400 jobs, or about 5 percent of its workforce. The company will employ 750 people in markets such as China and India, it said. The company expects to save US$100 million in the year ending on March 31, 2008 from the job cuts. The employee reductions will cost between US$50 million and US$60 million before taxes, with most being recorded in the quarter ending June 30, Lenovo said. The job cuts, Lenovo's second since it bought IBM's PC unit in 2005, will help it boost profitability, which trails larger rivals Hewlett-Packard Co and Dell Inc. Lenovo's gross margin, or the percentage of sales left after deducting production costs, is half that of market-leader Hewlett-Packard's. (For more biz stories, please visit Industry Updates) |
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