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Huge computer merger drags on
By Wen Dao (China Daily)
Updated: 2004-12-07 09:14

The largest merger deal in China's computer industry drags on, as the country's biggest computer maker Lenovo Group halted the trading of its stocks on the Hong Kong Stock Exchange. However, Lenovo continued to remain silent on a speculated deal to acquire US giant IBM's plant in Shenzhen.

Hong Kong-listed Lenovo asked the Hong Kong Stock Exchange yesterday morning to halt transactions of its stocks, because it would make an announcement containing price-sensitive deals.

However, the company did not issue any statement yesterday until the market closed.

A Lenovo spokeswoman declined to specify when the statement will be made, only saying the company would follow the rules of the securities regulatory authorities.

She also refused to say what the statement will contain.

However, it is widely believed the statement will be related to the acquisition of the world's biggest information technology company IBM's major production base in Shenzhen of South China's 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 per cent 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 yesterday the Chinese company agreed to sell IIPC's 20 per cent of the stakes in its hand to Lenovo, mainly under the request from IBM.

Great Wall's chairman Chen Zhaoxiong said 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 to IBM.

The Chinese company 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 Lenovo's 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 tech-nological design capability in IIPC, Lenovo has a much larger chance to expand overseas, said Huang.

The expertise of IIPC in OEM can also help Lenovo open another business line.

Lenovo, the largest PC maker in China, has some 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 can 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 estimate Lenovo is likely to pay IBM with some of its stocks, which still allows IBM to have some control over the production facility.

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