Fujitsu spun off its PC business into a separate subsidiary almost two years ago in anticipation of a sale to Lenovo. The terms don’t appear to have improved with age. With the ¥17.9bn ($157.4m) purchase of a 51% stake in Fujitsu’s PC business, the always-thrifty Lenovo hits a new low on price.
With this deal, which will also see Development Bank of Japan take a 5% stake in the spinoff, the target fetches an enterprise value of $309m, or just a hair under 0.1x trailing revenue. In its 2004 pickup of IBM’s PC business, which until today stood as the lowest valuation for a Lenovo acquisition, the Beijing-based company paid slightly more than 0.1x. According to 451 Research’s M&A KnowledgeBase, Lenovo has never spent more than 0.6x trailing 12-month revenue.
Lenovo frequently buys unwanted business units, as it did with IBM’s PC business and Google’s Motorola Mobility a decade later. Although the rationale for those deals was North American growth, at the time of each of those transactions, Lenovo’s PC and smartphone businesses, respectively, had little footprint in the US. With Fujitsu, it obtains an asset with only limited sales outside of Japan. Instead, the ability to add scale and drive down component prices motivated today’s acquisition.
Through the first half of its fiscal year, Lenovo’s profit margin dropped by one-quarter. Lenovo must increase those margins as top-line growth isn’t available. According to 451 Research’s VoCUL service, only 7% of North American consumers planned to buy a laptop in the next six months, an all-time low. Corporate business isn’t likely to make up the difference. A separate VoCUL survey of business buyers shows anticipated purchases of desktops and laptops diving to record lows.
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