Catalog:Australia latest report
Posted on Friday, January 2014, 1 24:14

Transaction price is less than half of X86 server's annual revenue


Huo Jinjie, president of IDC China, believes that Lenovo's completion of the acquisition at a price less than half of the target's annual revenue is very cost-effective.

IDC data shows that from the fourth quarter of 2012 to the third quarter of 2013, IBM X86 sales were US$55.12 billion, accounting for 13.9% of the global market share, ranking third. "Even if the profit margin is calculated at 5%-10%, this business will bring Lenovo 3-5 million dollars in profits every year, and within 5 years, Lenovo will be able to recover its costs." Huo Jinjie said.

According to IDC data, after the completion of the acquisition, Lenovo will occupy more than 14% of the global PC server market share and become the world's third largest server manufacturer, second only to HP and Dell. In the server field, Lenovo once again stood in an echelon with these two giant companies.

Will improve Lenovo profits

Lenovo Group is now the world's largest PC manufacturer, but the global PC business has been declining for 7 consecutive quarters. It is unrealistic for United to achieve a substantial increase in the net profit of the PC business. The smartphone and tablet business is in the investment stage.

JPMorgan Chase believes that the acquisition of IBM's low-end server business is expected to improve Lenovo's profits and may promote an 2016% increase in earnings in the 18 fiscal year.

Yang Yuanqing also said yesterday that the gross profit margin of IBM X86 is more than 20%, which is higher than that of PC. "We are absolutely confident that we can make money after buying it. We feel that it is better than PC. The competition in this field is not as fierce as PC. There are only a few main players: HP, Dell, Lenovo, and Cisco." New Beijing News reporter Lin Qiling

"Private heart" to IBM's choice of Lenovo

As early as last spring, IBM and Lenovo started preliminary negotiations on the sale of low-end server business. The negotiations broke down due to failure to reach an agreement on the price.

After the sale plan was shelved, IBM announced in August last year that it would invest $8 billion in innovation and research and development funding for X86 servers. This plan was once seen by the outside as a signal that IBM will no longer sell the business.

Why did IBM finally agree to sell its X86 business to Lenovo at a "low price"? Huo Jinjie, president of IDC China, believes that at a price of US$23 billion, everyone is willing to take over, including HP and Dell. However, Lenovo has always been IBM's best choice under the premise that there is no big difference in the purchase price. From IBM's point of view, IBM hopes to transform to cloud computing business and get rid of low-end hardware business. However, HP and Dell have been closely following IBM in recent years, and the company's development direction is closer to that of IBM, which is a bigger competitor to IBM. Lenovo and IBM are transforming in two directions, so IBM is more willing to become Lenovo.

Source: Beijing News