Lenovo Computes Back to Profits, Takes Over Fujitsu's PC Business

Lenovo Group 2Q Net Profit Down 11% On Higher Operating Expenses

Japan's Fujitsu said on Thursday it had agreed to merge its struggling PC business with Lenovo, giving the Chinese computer giant a controlling share of the business. The merger also includes the Development Bank of Japan.

Lenovo will take a 51 percent stake in the PC business that the Japanese electronics maker spun off a year ago, while the state-owned Development Bank of Japan will take 5 percent.

When it comes to payment, Lenovo said it would pay Fujitsu $156.7 million (17.8bn yen) in cash, and another $22 to $112 million by 2020, based on performance.

Fujitsu of course had already spun off its PC unit back in February 2016 and at one stage there was talk of Japanese system makers Toshiba, Fujitsu and Vaio forming their own joint venture that would combine their respective PC units into a single business. DBJ plans to contribute 2.5 billion yen.

Lenovo shares increased by nearly 3% in early Thursday trading in London, outpacing the broader market that was off by 0.2%.

The deal is expected to close in Q1 2018, and the resulting three-company venture will keep trading under the Fujitsu brand.

Revenue at Lenovo reached $11.8 billion in comparison to a year ago at the same time of $11.2 billion.

A gain in taxation of more than $118 million helped Lenovo earnings to beat analyst estimates of $44 million.

Most PC makers have struggled the past four to five years as the shift to smaller, mobile electronic devices has caused the PC market to plummet.

Lenovo's global PC unit shipments rebounded 17 percent from the previous quarter, though its PC market share in the six months dropped 0.2 percentage point to 21 percent, Lenovo said, without revealing shipment numbers.

Tablet shipments increased by 8.9 percent year-over-year to 2.97 million units.

Lenovo's business has grown 14 percent year-over-year in emerging markets, including India. However, it said that the agreement it signed with Fujitsu would make a positive impact to its worldwide business. "The combination of strong execution and building solid foundations continue to be Lenovo's strength. We will continue to invest in building foundation and core competence for the two new growth engines, which will bring stable and sustainable returns".

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