Lenovo buys $614 mln stake in PCCW digital units for IT services growth (updated)

Pccw

15/06/2022 04:59

(Adds details of deals, stocks move)
    June 15 (Reuters) - Chinese personal computers maker Lenovo
Group  0992.HK  is acquiring stakes worth $614 million in two
digital units of Hong Kong telecoms firm PCCW Ltd  0008.HK ,
betting that a post-COVID recovery and hybrid work model will
drive IT services demand.    
    Lenovo, the world's largest maker of personal computers,
said in a statement late on Tuesday it will buy an 80% stake in
Digital Era Enterprises and a 20% stake in PCCW Network
Services, a holding company for a unit that provides technology
solutions to government entities in Hong Kong.
    The deals would diversify its businesses and were important
for the company's long-term development, Lenovo said.
    "The transaction allows the company to expand its IT
services capabilities, its suite of service offerings as well as
the geographic and vertical coverage of customers and partners,"
    it said.
    Lenovo, which last month warned of a hit to shipments in the
short term due to China's COVID-19 lockdowns exacerbating chip
shortages, will pay PCCW $513.6 million in cash and issue 86.4
million new shares, or a 0.71% stake, at HK$9.025 a piece.
 urn:newsml:reuters.com:*:nL2N2XI06C
    PCCW, controlled by Hong Kong tycoon Richard Li, anticipates
a gain of $100 million from the disposal, it said in a separate
filing, adding it will use the proceeds to invest in growth
areas and to repay debt, among others.
    Shares of Lenovo slipped as much as 2.6% on Wednesday to
HK$7.37, while PCCW gained 2.4% in its best day since March 16.
That compared with a 1% gain in the broader market  .HSI .
    Last month, Lenovo posted an 18% jump in revenue to $71.6
billion for the fiscal year ended in March, of which its
Infrastructure Solutions Group (ISG) business saw a 13% growth
in revenue to $7.1 billion, and its newly formed Solutions and
Services Group (SSG) saw a 30% growth to $5.4 billion.
    Lenovo said SSG, which benefits from growing IT services
demand, is the key to driving sustainable growth for the
company. 

 (Reporting by Sameer Manekar in Bengaluru and Donny Kwok in
Hong Kong; Editing by Muralikumar Anantharaman)
 ((Sameer.Manekar@thomsonreuters.com ; Twitter: https://twitter.com/sameer_manekar))