IBM is taking advantage of a rally in Lenovo shares as it sells units including personal computers to focus on more profitable areas such as software and computer services. Lenovo’s stock has surged 38% since May 26 last year, when IBM was first allowed to sell part of its stake.
The Chinese company moved its headquarters to Raleigh, North Carolina after buying IBM’s PC unit in May 2005 for $1.25 billion in cash and stock. IBM received an 18.9% stake in Lenovo as part of the deal.
IBM is getting out and it is doing so with the blessing of Lenovo.
There are all sort of possible scenarios as to why this is happening.The share price is high, ever a good time to sell.
Lenovo said last month that it plans to cut 1,400 jobs, or about 5% of its workforce. The company will employ 750 people in markets such as China and India. The company expects to save $100 million in the year ending on March 31, 2008 from the job cuts.
Another guess is that IBM is simply not certain of the future for Lenovo. It has bet the bank on the Beijing Olympic Games and surveys are showing that the old magic is not there. Young people prefer football.
For Lenovo these are interesting times.
Source: China View