Lenovo Group has already agreed to purchase a controlling stake in Fujitsu Ltd.’s PC unit for a fee worth $269 million. This comes at a time when the PC market is experiencing weak sales as more users opt for mobile devices.
Lenovo recently lost the title of the world’s largest PC maker crown to HP Inc. earlier this year. Since then the company has been sourcing for ways to ensure that it strengthens its core business and challenges HP again. There is, however, a decline in the purchase of PC as the company witnessed a profit decline over July-September, reaching the red line for the first time in 2 years.
The CEO of Lenovo Yang Yuanqing stated that “PC is still the core of Lenovo. It is still a very decent market … commercial customers will still use PC.”
Lenovo announced that they will be paying $156.70 million cash while the rest will be paid based on performance from now till 2020 as they look to acquire 51% shares of Fujitsu Client Computing Ltd.
Analyst Bryan Ma stated that “Lenovo has been trailing HP at the global level by about 1-2 percentage points of share for the past two quarters, so adding Fujitsu to the mix, in theory, helps close that gap.” He further added that “Lenovo gets to bolster its position in Japan, where it currently already leads, Fujitsu is too small on a global level to get (Lenovo) much scale.” Thus implying that Fujitsu stands to gain more from the deal.
The two companies announced October last year that they were looking for ways to corporate in their PC business. The news of the acquisition has pushed the shares of Lenovo up by 5% on Thursday, hitting their highest since August. The lower profits they got from the third quarter masked the positive changes.
Profits in the PC sector had been declining for a while now. Lenovo recorded a profit of $139 million for the Q2 this year, this is a low figure compared to the $157 million they posted a year ago. In terms of revenue, the company recorded $11.8 billion which is a bit higher than the $11.2 billion recorded last year while beating the $11.3 billion estimated by analysts.