Lenovo is in talks to buy International Business Machines(IBM) Corp, a person well-known with the matter said, reviving talks that fell apart last year over valuation.
Previous spring, IBM was in forward discussions to sell all or part of the so-called x86 server businesses to Lenovo which is China base company, people well-known with the matter said at the time. But the discussion broke down amid disagreement between the companies over value, the person said. Lenovo put the worth of the operation at below $2.5 billion, a different person said at the time.
In a report Tuesday, Lenovo said it was in discussion about a possible acquisition, sending its shares up more than 3%. In a statement Lenovo said that it is "in preliminary negotiations with a third party in connection with a possible acquisition" but it hasn't reached an agreement on a contract. Lenovo group, which bought IBM's PC business in 2005, didn't say whether its acquisition discussion involved the server business.
A spokesman from Lenovo declined to comment beyond the company's most recent statement.
Earlier this week, people well-known with the issue said IBM was exploring a sale of the server business again and that Dell Inc. was one party looking at the big business. But it wasn't clear how sincerely Dell was considering an acquisition.
A contract could turn Lenovo into a main competitor to Hewlett-Packard Co. HPQ +0.81% and Dell in servers as the Chinese company already outpaces its U.S. rivals in the PC market. The purchase would help Lenovo secure a new source of growth and profit as world-wide PC sales are plummeting and the company's fledgling smartphone business hasn't yet taken off outer China.
But there could be hurdles to a contract between Lenovo and IBM. Any foreign investment by a Chinese company in a U.S. company fixed to critical technology or national security could be looked at by U.S. regulators. Lenovo's 2005 acquisition of IBM's PC unit came under scrutiny by the U.S. Congress and the U.S. Committee on Foreign Investment earlier than the contract was approved.
Lenovo Group last year became the world's major PC maker by units shipped, overtaking Hewlett-Packard. Even though the company has been outperforming its PC business peers in recent years, the overall PC industry faces a tough business climate with sluggish demand for desktop and laptop PCs, as consumers and businesses pay out more money on mobile devices. For Lenovo, acquiring IBM's server business would help expand its company portfolio, analysts say.
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