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IBM and Lenovo: details about the deal

A wesbite called Linux Business Week has some details about the IBM Lenovo deal that were not reported elsewhere:

The way the deal is structured Lenovo will get IBM's designs, its PC R&D arm and all its PC people starting with IBM Personal Systems Group general manager Stephen Ward.

Ward will be CEO of Lenovo and report to Lenovo's current CEO Yang Yuanqing, who will be chairman.

So the deal won't totally spook IBM's corporate customers, who might not be thrilled at the prospect of buying Chinese boxes, Lenovo will get to use the IBM logo for next five years and will own the "Think" brand.

It will phase in the switch to the Lenovo brand in stages, starting with the IBM name only, then IBM-Lenovo in 18 months, then Lenovo with a tag credit line for IBM in three-and-a-half years.

As an additional assurance, Lenovo will be IBM's preferred PC supplier and fill Big Blue's presumably large internal PC requirements.

Wily old IBM will keep the services and financing part of the business, and provide marketing and demand generation services for Lenovo. It'll get paid for its warranty support and lead generation. In return, Lenovo will get a sales fee for selling IBM financing and support.

The creation of the new entity, headquartered in New York with operations in Beijing and Raleigh, North Carolina, will catapult the 20-year-old Chinese company into being world's third-largest PC vendor after Dell and Hewlett-Packard, albeit a distant third with 5.6% of market.

Dell owns 16.4% and HP 13.9%. Lenovo on its own has maybe 2% or 3%, almost all of it Chinese...

...However, in the last two years [Lenovo has] been losing ground in China to nimbler multinationals like Dell, the only major PC player to be consistently profitable. Lenovo now controls 27% of its home market.

Amazingly, according to the Wall Street Journal, Dell's cost structure in China is lower than Lenovo's...

...Following the deal, Lenovo will have 19,000 employees, 10,000 of them from IBM. Of those 10,000, 40% are in China and 25% in the US...

IBM's long-term participation in the company depends on Lenovo's performance. The stock it's getting is subject to lock-ups expiring in three years. IBM said, "We will evaluate this investment upon release of the lock-ups."

Emphasis added. The Linux Business Week article is here.

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