On December 7-8, 2004, Lenovo Group Co., Ltd. (SEHK: 992; ADR: LNVGY), the leading personal computer manufacturer in China and Asia, and IBM (NYSE: IBM) announced an agreement. A major agreement: Lenovo will acquire IBM's personal computer division. The transaction value includes US$1.25 billion in cash and stock; the total transaction value is approximately US$1.75 billion, and IBM will hold 18.9% of Lenovo's shares. It is expected that before the end of the second quarter of 2005 Complete the transaction. Established the world's third largest leading PC factory, with its global headquarters in New York and its main operation centers in Beijing and Raleigh (located in North Carolina, USA). Mr. Stephen M. Ward, Jr., currently senior vice president of IBM and general manager of IBM Personal Systems Division, will serve as Lenovo's CEO after the acquisition. Mr. Yang Yuanqing, currently Vice Chairman, President and CEO of Lenovo, will serve as Chairman of Lenovo’s Board of Directors after the acquisition. Lenovo's acquisition of IBM's global PC business, do the pros outweigh the cons or do the cons outweigh the pros? Is it a good thing or a bad thing?

Benefits: 1. Join forces to create a global PC leader. Lenovo acquired IBM's global desktop computer and notebook business and formed a strategic alliance with IBM to bring IBM's enterprise-class PC technology to the consumer market and the fast-growing Chinese market, while also giving Lenovo the ability to cover global markets outside of China and Asia. . 2. Based on the combined sales performance of both parties in 2003, this merger means that Lenovo's annual PC shipments will reach 11.9 million units and sales will reach 12 billion US dollars, thus allowing Lenovo to grow based on the current scale of its PC business. 4 times. Calculated on a year-on-year basis in 2003, it will generate revenue of approximately US$12 billion, making it the world's third largest PC manufacturer. 3. After the acquisition, Lenovo will combine IBM's world-famous "Think" brand notebook business, Lenovo's leading brand awareness in China, high-quality services and support for consumer and commercial customers, and the world's fastest-growing IT market in China. The combination of strong strength and leadership position in the world has resulted in a huge distribution and sales network in 160 countries around the world and extensive global recognition. After the acquisition is completed, Lenovo will have leading commercial notebook products, leading R&D and product differentiation capabilities, stronger innovation capabilities and a richer product portfolio. The new company will have global market coverage, strong brands, diversified products and leading R&D capabilities. 4. Establish long-term strategic cooperation between Lenovo and IBM in PC sales, services and financing. According to the agreement, Lenovo and IBM will form a long-term strategic alliance, and IBM will become Lenovo's preferred service and customer financing provider. Lenovo will become IBM's preferred PC supplier so that IBM can provide a variety of PC solutions to its large, medium and small business customers. 5. Generally speaking, yes. This is a good attempt for Chinese companies to enter the world and become a Fortune 500 company.

Mr. Liu Chuanzhi, Lenovo’s current chairman of the board of directors, pointed out: “As the founder of the company, I am very excited to see that Lenovo will take a breakthrough step in international development. Lenovo has achieved great results in the past two decades. Lenovo has developed into the number one PC company in China and even Asia. Our unwavering goal is to become an international company. From Lenovo changing its logo in 2003 to signing a contract to become a global partner of the International Olympic Committee in 2004, to today Forming a strategic alliance with IBM, I am happy to see that Lenovo is gradually moving towards the ranks of the world's top companies." 6. Is it a win-win situation? For IBM: getting rid of the burden is good news for the stock market. IBM will hold 18.9% of Lenovo Group's shares. IBM hopes to reap the benefits after the deal is completed. "Over the past many years, we have proactively repositioned IBM as the world's leading provider of 'on demand' solutions for all sizes and industries," said Samuel J. Palmisano, IBM Chairman and CEO. Provide services to enterprises and institutions. This requires us to focus on enterprise-level customers and continue to invest heavily in R&D to accumulate intellectual capital. At the same time, the PC business in this industry increasingly requires huge economies of scale to focus on satisfying individual users. and individual buyer needs.

Today's announcement further strengthens IBM's focus on the enterprise market, and on the other hand creates a new global business better positioned to seize development opportunities in the PC industry. "Lenovo is a strong partner for us in the consumer and desktop markets in China and Asia." We actively work with Lenovo to provide all the elements needed to form this strong, successful, and long-lasting global alliance. "IBM will continue to provide our customers with IBM, and Think brand PCs. We will participate in the home and consumer markets by developing more advanced microprocessors and open software technologies for next-generation computing platforms. This opportunity will also highlight IBM's unique innovation capabilities. "For Lenovo: It is a sprint to go abroad and become one of the three giants in the IT industry. Mr. Yang Yuanqing, the current president and CEO of Lenovo Group, said: "The development of the Internet has provided the PC industry with broad development space, but also brought greater challenges. Only companies with world-class scale, leading technology, and efficient operations can Determine the future. By acquiring IBM's global PC business and forming a strategic alliance with IBM, Lenovo will be able to integrate the advantages of both parties, quickly gain global brand recognition, global customers and a huge distribution network, and obtain a richer product portfolio and more efficient operations. and leading technology." At the same time, Lenovo can have a five-year license agreement for the world-famous IBM trademark, and own the world-renowned "Think" family trademark, allowing Lenovo to take advantage of IBM's strong global brand. , to help build its brand awareness in the international market.

Disadvantages or risks:

1. The stock market reaction is good news for IBM, and people in the industry generally believe that it is getting rid of its burden. Be cautious about Lenovo, because so far, all such acquisitions and integrations between enterprises have been unsuccessful. 2. For Lenovo, it is a last-ditch battle. If the integration is successful, it will become the world's third largest PC manufacturer. If the integration is not successful, Lenovo will be in a desperate situation due to indigestion

3. When the transaction is completed, Lenovo will have approximately 19,000 employees. About 10,000 of them are from IBM (nearly 40% of them are now working in China, and less than 25% are in the United States), and about 10,000 are from Lenovo. Lenovo's ability to manage and control the global market will undergo severe tests. At the same time, it is foreseeable that management costs and expenses will not be underestimated.

4. Whether the two companies can have the same cultural concepts in terms of continuous innovation, customer orientation, and creation of shareholder value is also a difficult test.