The country's biggest computer maker, Lenovo Group, stopped
trading of its shares on the Hong Kong Stock Exchange Monday, but
remained silent on a speculated deal to acquire US giant IBM's
plant in Shenzhen.
An announcement on price-sensitive deals is expected after the
trade halt, but the company had not issued a statement by close of
business on Monday.
A Lenovo spokesperson declined to specify when the statement
would be made, only saying the company will follow the rules of the
securities regulatory authorities.
It is widely believed that the statement will be related to the
acquisition of the world's biggest information technology company
IBM's major production base in Shenzhen, Guangdong
Province.
The production base, named International Information Product
(Shenzhen) Co Ltd (IIPC), is a joint venture between IBM and its
long-time partner China Great Wall Group Corp, with IBM holding 80
percent of the stakes.
IIPC is IBM's most important notebook computer production base
worldwide and houses its biggest Intel-architecture computer server
production facility in the Asia-Pacific region.
Sources close to Great Wall Group said on Monday that they had
agreed to sell their 20 percent stake in IIPC to Lenovo at the
request of IBM.
Great Wall's chairman Chen Zhaoxiong said that recently the
focuses of his company were to strengthen self-owned brands and
foster new profit growth engines.
One previous pillar of Great Wall Group's business was the
original equipment manufacturing (OEM) business with IBM.
They opened a US$280-million chip assembly and testing plant in
Shenzhen, which was believed to be the beginning of its industrial
restructuring.
For Lenovo, the acquisition of IIPC will greatly elevate their
manufacturing and design capability, according to Huang Yong, a
senior industry analyst with the domestic research firm.
Although Lenovo has a strong presence in the Chinese market, its
brand influence in the international market is quite small.
With IBM's reputation and technological design capability in
IIPC, Lenovo has a much larger chance to expand overseas, said
Huang.
Lenovo, the largest PC maker in China, has had difficulties in
further expanding or even maintaining its market share due to
fierce competition.
As its expansion in mobile phone manufacturing and IT services
are far from the company's expectations, OEM business could
diversify Lenovo's business line.
Since the deal was valued at US$1-2 billion by some investment
banks and Lenovo may not be able to afford it, industry experts say
that they are likely to pay IBM with some of their stocks, which
would allow IBM to retain some control over the production
facility.
(China Daily December 7, 2004)