Sat, May 03, 2008 - Page 11 News List

Lenovo plans acquisitions to win back market share

STATUS After Acer foiled its European expansion plans last year, Lenovo is aiming to use its financial muscle to take back the world’s No. 3 spot from its Taiwanese rival

BLOOMBERG

Lenovo Group Ltd (聯想) is seeking acquisitions to regain the world’s third-largest PC seller ranking lost to Acer Inc last year, chairman Yang Yuanqing (楊元慶) said.

“We are not satisfied with our current market share and global ranking,” Yang said in an interview with Bloomberg Television broadcast yesterday.

“I believe there will be further consolidation in the industry and we hope to seize the opportunity” to buy, he said.

Lenovo, which shot to prominence with the 2005 purchase of International Business Machines Corp’s PC unit, had its European expansion plans foiled last year when Acer bought Packard Bell BV. Computer makers such as Fujitsu Siemens Computers (Holding) BV may be a target for Lenovo, said Joseph Ho, a Daiwa Institute of Research analyst.

“It makes sense for Lenovo to want to acquire as it has the financial muscle,” said Ho, who rates Lenovo “outperform.”

“The question is what to acquire and at what price,” he said.

Lenovo had cash and equivalents of US$2.2 billion as of Dec. 31, according to the latest information from the company, which gets more than half of its sales from Asia.

The US$1.25 billion purchase of the IBM unit three years ago made the company the world’s third-largest computer maker. Lenovo, which moved its headquarters to Raleigh, North Carolina, after the acquisition, lost the position to Acer in the second half of last year, after the Taipei-based rival bought Packard Bell.

Yang ruled out acquiring Acer but declined to identify target firms.

Lenovo’s current market value is HK$58.3 billion (US$7.5 billion), about 6 percent of the size of industry leader Hewlett-Packard Co data compiled by Bloomberg show. Acer is valued at NT$163.3 billion (US$5.4 billion).

Lenovo shares rose 5.4 percent to HK$6.28 at the close of trading in Hong Kong, while the MSCI AC Asia-Pacific Information Technology Index advanced 1.5 percent. The stock has more than doubled since the IBM purchase, outperforming the benchmark, which gained 40 percent.

Acer shares climbed 2.9 percent to NT$67.90 on the Taiwan Stock Exchange.

During the first quarter, Lenovo shipped 21 percent more PCs than a year earlier on demand in Asia, researcher IDC said on April 16. That trails Acer, whose 66 percent growth is the fastest among the top four PC makers.

Charles Guo, a Hong Kong-based analyst at JPMorgan, said Lenovo’s revenue from the Greater China region, including Taiwan and Hong Kong, will rise this year while growth may slow in Europe and the US.

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