Mon, Dec 06, 2004 - Page 10 News List

IBM deal could benefit Taiwan: report

ROSY OUTLOOK If IBM decides to sell its personal-computer business to Lenovo, local companies could see a rise in contract orders, Smith Barney Citigroup says

By Amber Chung  /  STAFF REPORTER

The reported acquisition of Inter-national Business Machines Corp's (IBM) personal computer (PC) business by China's largest PC maker, Lenovo Group Ltd (聯想), could be a gateway to enhanced business opportunities for local contract manufacturers and brand vendors, an analyst said yesterday.

"The deal could benefit Taiwan-ese contract makers with more new orders," Kirk Yang (楊應超), head of Asian technology hardware research with Smith Barney Citigroup, said in a report yesterday.

As Lenovo outsources nearly 100 percent of its PC products, once the Chinese company acquires the PC business of IBM whose products are mostly made in-house, it is expected to release more orders, Yang said.

IBM is the third largest PC vendor following Dell Inc and Hewllet-Packard Co, while Lenovo is the No. 9 player, according to research house Gartner Inc.

Lenovo, partly owned by the Chinese government, is expected to ship 3.8 million desktop computers this year, manufactured by Taiwan's Elitegroup Computer Systems Co (精英電腦), Gigabyte Technology Co (技嘉) and Micro-Star International Corp (微星), according to Smith Barney.

The Chinese company's 350,000 laptops shipped this year are also made by Taiwan's Quanta Computer Inc (廣達電腦), Wistron Corp (緯創) and First International Computer Inc (大眾電腦). Hon Hai Precision Industry Co (鴻海精密) would start making notebooks for Lenovo next year, the Smith Barney report said.

Compared to Lenovo's active outsourcing policy, only half of Big Blue's 4 million laptop shipments this year are outsourced to Quanta and Wistron. IBM's 5 million desktops are mainly made by Taiwan's Universal Scientific Industry Co (環隆電器), Gigabyte, Elite and Micro-Star, according to the report.

The deal would be good news to Taiwanese own-brand PC vendors like Acer Inc, Yang said, noting that IBM's move to sell its PC division could drive some of its customers away, giving other competitors new business opportunities.

IBM is reportedly putting its PC business up for sale through Merrill Lynch and is in talks with Lenovo for the moment. The deal would put an end to the era of the industry bellwether which introduced the world's first PC in 1981 but fill the industry giant's coffer with about US$2 billion.

The three parties reportedly involved in the sale all declined to confirm.

Simon Yang (楊勝帆), a senior researcher at Taipei-based Topology Research Institute (拓墣產研), said the increase or the shift of orders could happen in the first half of next year at the earliest if the deal comes about.

Nevertheless, considering IBM's high brand value and growth potential for its PC segment, Simon Yang said that forming strategic alliances, instead of giving up the business, could still achieve the best synergy between the two parties.

"IBM could leverage Lenovo's distribution networks to boost its business in China, while Lenovo could gain more bargaining power on cutting the price of component parts through the partnership," he said.

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