Sat, May 25, 2013 - Page 14 News List

Lenovo can buy ‘almost any size’ asset

CASH IS KING:Lenovo hopes to weather a global slump in PC demand by diversifying and says its cash reserves enable it to set no limit on the size of acquisition targets

Bloomberg

Lenovo Group Ltd (聯想), the world’s second-biggest PC maker, said the company’s cash reserves of more than US$3 billion enable it to pursue an acquisition of almost any size to expand in new business areas.

The company is most interested in adding assets to bolster its growing business for smartphones and tablets, and hardware such as servers and storage for business computing, Lenovo Group chief financial officer Wong Wai Ming (黃偉明) said in a telephone interview on Thursday.

There is “no limit” for Lenovo when considering the size of targets, Wong said, without commenting on any specific opportunity. “We can actually look at literally every single opportunity because we obviously have the ability to finance.”

Lenovo CEO Yang Yuanqing (楊元慶) is pursuing a broad diversification strategy to help weather a global slump in demand for PCs. The move into smartphones, tablets, TVs and home entertainment systems is already paying off, as Lenovo reported a 90 percent jump in profit in the three months that ended in March.

Net income climbed to US$126.9 million in the January-to-March quarter, from US$66.8 million a year earlier, Lenovo said on Thursday. Revenue rose 4.5 percent to US$7.83 billion.

Lenovo plans to become a “relevant global player” in servers and storage devices within three years, Yang said at an earnings conference on Thursday. The company last year allied itself with EMC Corp to boost sales of storage equipment.

Talks with International Business Machines Corp (IBM) for Lenovo to buy parts of the Armonk, New York-based company’s server division broke down after the two sides failed to agree on a price, a person familiar with the discussions said on May 3.

Lenovo wanted to pay toward the low end of the US$2.5 billion-to-US$4.5 billion range that Bloomberg News reported on April 19, while IBM sought a substantially higher valuation, the person said, without providing details.

While Lenovo can become “a very decent player” in servers by organic growth alone, the company will be open to expansion via potential acquisitions, Yang said in the interview.

“If we can get a good deal, that’s definitely a shortcut, but you can’t count on that,” Yang said. “That’s opportunity-driven growth. We still need to prepare the organic growth approach.”

Without commenting specifically on IBM, Wong said that valuation is a key consideration for any purchase.

“We look at the valuation, does the acquisition add value to our business?” Wong said. “We obviously make sure that after buying the company it will fully integrate into the Lenovo family, so we will be able to leverage the full value of the asset that we acquire.”

Shares in Lenovo, which has its headquarters in Beijing and Morrisville, North Carolina, rose 3.8 percent to HK$7.66 at the close in Hong Kong trading, the highest level since March 28.

The stock has climbed 9.1 percent this year, while the city’s benchmark Hang Seng Index has declined 0.2 percent.

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