Lenovo Group Limited is reportedly acquiring USD 614 million worth of shares in two digital units of PCCW Limited, a Hong-Kong telecoms company, hoping that post-COVID-19 recovery and hybrid work paradigm will boost the demand for IT services.
The Chinese personal computers manufacturer cited that it aims to hold a 20% stake in PCCW Network Services, a holding company for a subsidiary that offers technology solutions to Hong Kong government agencies, and 80% ownership in mobile app development firm, Digital Era Enterprises.
According to Lenovo, the agreements were crucial for long-term growth and would diversify its business lines. Moreover, the company is looking to expand its product portfolio and IT services capabilities, along with the regional and vertical integration of partners and customers.
While last month Lenovo indicated a temporary downturn by cautioning of short-term damage to shipments given China's COVID-19 lockdowns that worsened chip shortages, the largest manufacturer of personal computers has bounced back and is planning to pay PCCW USD 513.6 million in cash and issue additional shares worth USD 86.4 million, or a 0.71% ownership, at USD 1.15 per share.
PCCW, chaired by Richard Li expects to incur a profit of USD 100 million from the sale, the proceeds of which will be utilized to repay debts and to make investments in new business ventures.
Meanwhile, PCCW’s shares climbed by 2.4% while Lenovo’s shares plunged by 2.6% to USD 0.94 which contrasted with a 1% increase in the overall market.
For FY 2021-2022, Lenovo announced an 18% increase in revenue to USD 71.6 billion of which its Infrastructure Solutions Group (ISG) business witnessed revenue growth of 13% to USD 7.1 billion as well as its newly founded Solutions and Services Group (SSG) saw annual growth of 30% to USD 5.4 billion.
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