The country's biggest computer maker, Lenovo Group, stopped trading of its shares on the Hong Kong Stock Exchange Monday, but remained silent on a speculated deal to acquire US giant IBM's plant in Shenzhen.
An announcement on price-sensitive deals is expected after the trade halt, but the company had not issued a statement by close of business on Monday.
A Lenovo spokesperson declined to specify when the statement would be made, only saying the company will follow the rules of the securities regulatory authorities.
It is widely believed that the statement will be related to the acquisition of the world's biggest information technology company IBM's major production base in Shenzhen, Guangdong Province.
The production base, named International Information Product (Shenzhen) Co Ltd (IIPC), is a joint venture between IBM and its long-time partner China Great Wall Group Corp, with IBM holding 80 percent of the stakes.
IIPC is IBM's most important notebook computer production base worldwide and houses its biggest Intel-architecture computer server production facility in the Asia-Pacific region.
Sources close to Great Wall Group said on Monday that they had agreed to sell their 20 percent stake in IIPC to Lenovo at the request of IBM.
Great Wall's chairman Chen Zhaoxiong said that recently the focuses of his company were to strengthen self-owned brands and foster new profit growth engines.
One previous pillar of Great Wall Group's business was the original equipment manufacturing (OEM) business with IBM.
They opened a US$280-million chip assembly and testing plant in Shenzhen, which was believed to be the beginning of its industrial restructuring.
For Lenovo, the acquisition of IIPC will greatly elevate their manufacturing and design capability, according to Huang Yong, a senior industry analyst with the domestic research firm.
Although Lenovo has a strong presence in the Chinese market, its brand influence in the international market is quite small.
With IBM's reputation and technological design capability in IIPC, Lenovo has a much larger chance to expand overseas, said Huang.
Lenovo, the largest PC maker in China, has had difficulties in further expanding or even maintaining its market share due to fierce competition.
As its expansion in mobile phone manufacturing and IT services are far from the company's expectations, OEM business could diversify Lenovo's business line.
Since the deal was valued at US$1-2 billion by some investment banks and Lenovo may not be able to afford it, industry experts say that they are likely to pay IBM with some of their stocks, which would allow IBM to retain some control over the production facility.
(China Daily December 7, 2004)
