Two ugly acquisitions do not seem to have sated Lenovo Group Inc’s (聯想) appetite.
Now the Chinese company is considering purchasing the PC business of Toshiba Corp, pitting itself against Taiwan’s Asustek Computer Inc (華碩), Japanese business daily Nikkei said.
According to the newspaper, the Japanese company stopped short of denying any spin-off plans, saying that reports of a sale “are not grounded in fact, nor is it in discussion with any individual company.”
What Lenovo does not need is more mergers and acquisitions.
Just two weeks ago, I argued that Lenovo needs to shift focus away from personal computers. It is in this business mostly out of habit and should not be throwing more money into such an anemic sector without solid signs that the market is to undergo drastic improvement.
Even the mere hint that Lenovo might be entertaining another deal should have shareholders worried.
To date, the company has failed to make good on its hefty purchases of Motorola Mobility Holdings Inc’s smartphone unit and IBM Corp’s server business. An investment of 20 billion yen to 31 billion yen (US$178 million to US$275 million) to take 51 percent of Fujitsu Ltd’s client computing division, announced earlier this month, will add to the indigestion. Buying Toshiba’s computer business would risk turning that into nausea.
Lenovo is very proud of its rising PC market share and crows about it constantly.
However, those gains over the past six years have been largely organic instead of being juiced by acquiring other brands.
History has not been kind to acquisitive PC players. Acer Inc (宏碁), which went on a buying spree last decade, enjoyed a short-term pop in sales and market share before everything fell apart. In the end, the Taiwanese company wrote off masses of goodwill, which forced it to post a large loss and resulted in a change of management.
Toshiba does not add much to Lenovo’s lineup. Its PC sales have declined precipitously. The Fujitsu deal, as well as a 2011 tie-up with NEC Corp, should be enough for Lenovo to expand its footprint in Japan. Even a bargain price would not make up for all the costs and upheaval that yet another acquisition would entail.
Maybe Lenovo is merely acting as a spoiler to Asustek, helping bid up the price with no intention of buying, or perhaps it wants the deal to stop its Taiwanese competitor from getting the boost.
Whatever their intentions, Lenovo management should walk away and get back to handling the problematic acquisitions the company already has on its plate.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners. Tim Culpan is a technology columnist for Bloomberg Gadfly.
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