dcsimg
RealTime IT News

FTC Clears IBM-Lenovo Deal

Federal Trade Commission (FTC) officials are stepping out of the way of a deal that lets IBM sell its PC division to China's Lenovo Group.

Documents filed on Friday granted the two companies an early-termination ruling under the Pre-Merger, Hart-Scott-Rodino Antitrust Improvement Act. The law serves as a waiting period giving the FTC and the U.S. Department of Justice proper time to make sure an acquisition complies with antitrust laws. Lenovo (doing business as Legend Holdings Limited) and IBM, along with its IBM Products divisions in the United Kingdom and Asia-Pacific spent $280,000 for the review.

The FTC may have lifted the waiting period anyway, considering the $1.75 billion deal gives IBM an 18.9 percent stake in Lenovo.

Other factors that may have favored an accelerated review are that Lenovo's new world headquarters will be in New York, not Beijing; the current IBM product-development team will remain in place; three-quarters of the shipments initially will be of current IBM PC products and more than half the employees will be current IBM employees.

Lenovo executives speaking at last week's Consumer Electronics Show say they are adopting an "aggressive yet prudent growth strategy" during the five-year transition including a plan to establish a worldwide distribution initiative outside of China and into North America and Europe -- places where Lenovo is not a household name.

The deal now heads to the U.S. Committee on Foreign Investment for approval, which determines whether a particular acquisition by a foreign country has national security issues. No time frame was given for the review.

Beyond international detente and distribution plans, Lenovo has an even bigger hurdle to jump.

Big Blue's PC division still stands far behind Dell and HP in sales revenue. In fact, IBM's legendary PC division was steeped in red ink -- reporting net losses of $139 million through June 2004, $258 million in 2003, $171 million in 2002 and a total loss of $397 million in 2001 -- the year when PC sales were perhaps most stagnant due to an economic downturn.