With large businesses, it is quite common to see business deals being made that are conducive towards their productivity and progress. However, sometimes, it is quite possible for these business deals to fold upon themselves, much like it happened with the business deal that had been discussed between the Asian company, Lenovo and the U.S based business, IBM.
The business deal between Lenovo and IBM focused around the x86 servers and supposedly, the deal fell through owing to a disagreement between both companies regarding the price and value of the deal. Although the two organizations had conducted a successful business deal previously in 2005 which pushed Lenovo into the limelight among the top 3 PC makers and retailers of the world, things have not gone as smoothly in this deal.
The deal came about because of the fact that IBM is struggling to make sales in the US market. Competition from other organizations like Dell and Hewlett Packard has been fierce and IBM has actually reported a drop of 17 percent in their revenue for the last quarter. The business deal was supposed to help target the Chinese market where demand for the x86 servers is still large compared to the US market and the product could fare much better over there.
On the other hand, despite vigorous negotiations that lasted for several weeks, Lenovo and IBM were unable to reach common ground regarding the pricing of the deal. While it is stated that IBM placed the value of their deal amount to around $6 billion, Lenovo has only offered to pay around $2.5 billion with the highest bid being placed at around $4.5 billion and refusing to go higher.
The difference in price and the refusal of each company to give way eventually caused the deal to fall through and this is why Wong Wai Ming, Lenovo’s Chief Financial Officer who had been conducting the talks with IBM, returned to Hong Kong without any kind of agreement.
Nonetheless, it is largely believed that both businesses are taking a breather and giving each other time to reassess and reconsider the terms of the deal. However, there is little proof to confirm that belief since both companies are being very tight lipped about revealing definite details. It is, however, believed that this is a negotiating tactic from Lenovo in a bid to make IBM drop the price.
Speculation and gossip is rampant about this situation owing to the fact that spokesmen from both organizations have chosen to stay stubbornly mute about the whole situation. Curiously, once the deal fell through, Lenovo’s stocks were reported to be seen at a decline of 2.7 percent, coming at a rate of HK$6.90. On the other hand, in New York, IBM’s stock rose by 1.4 percent and placed the value of their stock at $202.39.
Although there is no definitive word on whether Lenovo will go through with it or not, it is believed that owing to the previous work histories of both companies, a suitable arrangement can be reached that will be profitable for both.
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