China’s Lenovo Buys IBM’s PC Unit

International Business Machines Corp. has agreed to sell its personal computer business to Chinais largest personal computer maker, Lenovo Group Ltd., for US$1.25 billion. The sale brings to a close a major chapter in IBMis pioneering PC business that it started in 1981.

The agreement 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, the Reuters news agency reported. Lenovo is taking over IBMis desktop PC business, including research and development and manufacturing.

IBM will own a 18% stake in the new U.S.-based PC company, and will let it continue to use the IBM brand as well as other trademarks on PCis and notebook computers. The new company will become the number three maker of PCs behind behind Dell Inc. and Hewlett-Packard Co.

the new company will be based in New York, with principal operations in Beijing and Raleigh, N.C. It is expected that 2,500 IBM employees will join the new company.

The discussions have been rumored for weeks and were first reported by the New York Times last Friday.

During a question-and-answer session Tuesday at Oracleis OpenWorld conference, Dell chairman Michael Dell said he doubted the merger would work in the long run.

"When was the last time you saw a successful acquisition or merger in the computer industry? It hasnit happened in a long, long time...I donit see this one as being all that different," Mr. Dell commented.

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