Lenovo in Talks With Packard Bell

The world's third largest PC vendor hopes to strengthen its position among European consumers by acquiring Packard Bell BV, a top executive said Wednesday.

Lenovo Group Ltd. pursued a similar strategy when it agreed to buy IBM Corp.'s PC division in 2004, beefing up its market presence in the U.S. through the acquisition. The Chinese company burst onto the world stage at the time, and has spent the past few years pulling together two very different corporate cultures, Lenovo's and IBM's, into a single global presence. Lenovo's interest in buying Packard Bell shows a readiness to increase its size further by buying rivals.

Packard Bell is strong where Lenovo is weak, among European consumers, said Deepak Advani, senior vice president and chief marketing officer at Lenovo, at the sidelines of a briefing in Beijing.

Lenovo's tie-up with IBM's PC division was a great example of two companies with different strengths forming a solid union, he said. At the time of the purchase, Lenovo was strong among consumers in China, while IBM PCs were favored by enterprise users in the U.S. The deal put the companies in a position to benefit from each other's expertise geographically and in different market segments.

Lenovo is already strong among enterprise users in Europe thanks to the IBM purchase, Advani said, but weaker with consumers. Greater China, which includes China, Hong Kong and Taiwan, represented 39 percent of Lenovo's revenue during its fiscal first quarter, while the U.S. was 29 percent and Europe, the Middle East and Africa trailed at 20 percent, according to a report by Henry King, director of Asia-Pacific investment research at Goldman Sachs (Asia) LLC.

The company's talks with Packard Bell show it's serious about gaining market share in Europe and knocking Taiwanese rival Acer Inc. from its perch, he added. Acer derived over half of its revenue from Europe in 2006, and the region is dominated by Acer, Dell Inc. and Hewlett-Packard Co., he said.

Advani said the deal has more to do with Lenovo executing its strategy, and not with Acer.

Despite the advantages to a Packard Bell purchase, King warned that it seemed a bit early for Lenovo to begin seeking another acquisition after just emerging from the challenges surrounding its consolidation with IBM's PC division. The company announced a 13-fold surge in quarterly profits for its first quarter, which ended in June, due to cost cutting and strong PC demand.

"We are concerned that another acquisition this soon may slow its near-term momentum," he wrote.

Join the Discussion
blog comments powered by Disqus
 
You Might Also Like...