Lenovo will buy back its mobile subsidiary at twice its original selling price in a move to enter the emerging
Lenovo Mobile Communication Technology, which was sold at $1 billion in January 2008, will be repurchased for $2 billion, said a statement released late Friday by Lenovo, China's leading PC maker.
The
The deal should be concluded by April next year, and Lenovo will pay its parent company Legend Holdings $154 million in cash and issue about 80.9 million shares at HK$4.4 ($0.57) per share to cover the rest of the costs.
Lenovo Mobile made a net profit of 34 million yuan ($5 million) in 2008 and 40 million yuan ($5.9 million) in the first half of this year.
Although Lenovo moved into the mobile business in 2002 and was already the No.1 domestic handset maker by 2008, Lenovo Mobile recorded a pre-tax loss of 235 million yuan ($34.4 million) in the 2007 fiscal year.
"Our market share was threatened by the overflow of counterfeit handsets in 2007," said Yang Yuanqing, CEO of the world's fourth largest PC producer. "And also due to management problems at that time, we decided to sell the mobile arm and focus on the core PC business."
Lenovo Mobile is one of the manufacturers of the Ophone, the
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"It is no surprise that Lenovo made this move," said Fu Liang, a Beijing-based telecom analyst. "The emergence of
Two other PC giants, Dell and Acer, already announced earlier this year that they will enter the smart phone market.
Lenovo reported a net profit of $53 million in the second fiscal quarter that ended September 30, up from a $16 million loss in the previous quarter.
