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Shares in Lenovo, the world’s third-largest PC maker, slipped 7 per cent Tuesday before being suspended as investors reacted to news that IBM was selling a 3.5 per cent stake in the company for $123m.
IBM, which completed the $1.25bn sale of its PC business to China’s largest computer maker in 2005, has been selling shares in Lenovo that it acquired through the deal. The most recent disposal, arranged by Citigroup, will reduce the US company’s stake in Lenovo to 11.5 per cent.
IBM is cashing in on a modest rebound in Lenovo’s shares that began in June after they bottomed out at HK$2.187.
IBM initially priced its disposal offer at HK$3.20-HK$3.30 a share, representing a discount of 4-7.5 per cent. It ultimately placed the 300m shares on offer at the bottom of that range. Lenovo shares had been trading at HK$3.20 when they were suspended.
Investors punished Lenovo over the first half of last year after it revealed the extent of losses arising from the acquisition of IBM’s troubled PC unit.
Lenovo’s ability to turn the unit around is seen as a key test of corporate China’s ability to go global and establish recognised brands outside its own borders.
In spite of Lenovo’s admission in November that it was losing market share and experiencing price pressure in the US and its recording of an 8.3 per cent fall in US second-quarter sales and $18m of operating losses, its Hong Kong-traded shares had recovered to almost HK$3.50 this month.
US sales decreased another 4 per cent in the third quarter to $1bn, though this was offset by gains in the Greater China market.