Lenovo Still Hungry For Acquisitions

Lenovo has not lost its appetite for acquisitions, despite its recent multi-billion deals for IBM’s x86 server business and Google’s Motorola Mobility operations.

Speaking to journalists 18 March after the company’s meeting with shareholders, Lenovo CEO Yang Yuanqing said the vendor still has enough cash to buy more businesses as it looks to broaden its reach in the tech industry, according to the Wall Street Journal.

Growth Buys

“We will continue to use acquisitions as a means to grow,” Yang said, according to the newspaper. “Whenever there is a good opportunity, we will grasp it.”

At the same time, Lenovo officials appear to be looking to bolster server sales employees in the wake of comments by rivals such as Hewlett-Packard CEO Meg Whitman regarding the Chinese tech giant’s intent to buy IBM’s low-end server business for $2.3 billion (£1.4bn). The deal, which was announced in January and is expected to close later this year, will make Lenovo the world’s third-largest server vendor behind HP and Dell, give it a $5 billion (£5bn) server business and make it even stronger in the desirable Chinese market.

While speaking 3 March at the Morgan Stanley Technology, Media and Telecom Conference, Whitman said the Lenovo deal and Dell becoming a private company has created uncertainty in the server business, which she said HP hopes to take advantage of.

“We think there is a real near-term opportunity for HP to actually gain share among some of our competitors who appear to be a little less stable than we do right now,” Whitman said. “I’ve to say we look like the paradigm of stability in the industry right now, and so we’d aim to capitalise on that. … My view is Lenovo will be a very strong competitor over the long-term … but I do think there is a near-term opportunity for us to gain share given that we have consistency on our side.”

In a memo sent to the Lenovo server sales staff, Gerry Smith, executive vice president of Lenovo’s Enterprise Business Group, said it’s HP and Dell that are undergoing disruptions.

“Our competitors in the enterprise space are both in the midst of major corporate transitions,” he wrote. “As their customers try to avoid the real uncertainty and doubt created by those upheavals, you should feel very confident in presenting Lenovo and the great products and services we offer.”

Lenovo Plans

Lenovo is hoping that server deal will bring it the same fortune as its $1.25 billion (£753m) acquisition in 2005 of IBM’s PC business, which helped propel the company to the top of the global PC market. Lenovo is spending almost $5 billion (£3bn) combined for IBM’s server business and Motorola, both part of the company’s PC-Plus strategy to become a leader in every computing category.

Motorola, which the company is buying for $2.9 billion (£1.7bn), will give Lenovo more sway in the booming mobile device market, according to officials. Yang has said Lenovo will make Motorola profitable within four to six quarters without having to cut jobs.

Despite concerns that Lenovo is spending too much for IBM’s server business and Motorola, Lenovo executives said they have the money for more deals. According to the Wall Street Journal, Lenovo CFO Wong Wai Ming has said Lenovo currently has access to around $4.7 billion (£2.8bn) in cash and that the company is weighing raising even more money, though he was not specific.

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Originally published on eWeek.