Boston, MA 04/19/2013 (wallstreetpr) – The latest buzzword is that Lenovo Group Ltd (ADR) (PINK:LNVGY) (Closed: $16.63, Down by 2.46%), the renowned Chinese PC maker is all set to bid for the server division parts of International Business Machines Corp (NYSE:IBM) (Closed at $207.15, Down by 1.20%). No wonder the market shows a surge in Lenovo shares. IBM server division caters to running of computing functions and storage of corporate data through their X86 processors. This transaction when it comes about is to fetch projected amounts in the range of $2.5-$4.5 billion. However, the final figures are going to depend on associated liabilities and assets.
It is too early to talk anything regarding this bid since any agreement is still weeks away to bear fruit. This news comes eight years after the 2005 Lenovo purchase of PC unit from IBM. The earlier deal proved to be a major success that established the company position as the second largest PC producer in the world. Today it is diversifying its reach with newer products and this includes Smartphone and tablets. Last year there was an alliance with EMC Corp. for boosting server and storage equipment sales while dealing with running of corporate networks. Alberto Moel, a Hong Kong analyst believes that this latest bid on IBM business is going to bolster Lenovo capabilities further in the coming times.
Latest Hong Kong trading scene shows that Lenovo rose 8% to HK$7.0, which is its biggest gain since 2011. So far, share drop is in the range of 1.3% in the current year and this is approximately 4% decline in Hang Seng Index.
With emphasis on cloud computing, companies demand energy efficient and low cost servers that store information online. Server X86 is going to be an ideal fit for Lenovo since the chips in this IBM server are in keeping with the PC processors. Cost of business at IBM is higher and Lenovo is all set to bring this down and thus increase their profit brackets. Markets show that besides HPQ and three other top five PC manufacturers, Lenovo is the only other company that does not show last quarter shipment drops. This latest takeover bid can further strengthen its position and turn it into a force to reckon with in the Personal Computer world.
However it is necessary to remember that there has not been any definitive agreements as of yet and any news concerning the takeover bid is mostly a speculation. Therefore, there is nothing to do but wait and watch as the situation changes.
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