Lenovo will pay US$1.75 billion for IBM's computer business - a price Citigroup Smith Barney estimates is US$1.25 billion too much given the combined entity is likely to lose sales.

The larger Lenovo organisation would 'have to work hard to unify its cultural legacies' if it wanted to retain IBM's core business in enterprise notebooks and use the IBM brand in other geographies to grow volume, said research firm Gartner.

'Lenovo will need to target specific markets carefully to achieve this volume growth,' Gartner said.

A recent survey conducted by Forrester Research in the US found that '91 per cent of enterprises point to Dell, HP or IBM as their primary PC suppliers, but taking IBM out of the equation - and reducing the viable choices to two - would create big market share opportunities for Dell and HP'.

Forrester analyst Simon Yates said 'many potential IBM PC buyers [in the US] will rethink their plans' in light of Lenovo's takeover of IBM's ThinkCentre desktop and ThinkPad notebook PC business.

'The conventional wisdom says that loyalty to IBM - and ThinkPad notebooks in particular - runs deep, but our data showed the exact opposite,' Mr Yates said.

'On a unit basis, our data suggests that Dell and HP will split any potential IBM defectors evenly.'

Even before rumours of a sale emerged, Forrester research showed that 48 per cent of 171 prospective IBM customers would consider buying PCs from a vendor other than IBM next year. But Gartner said Lenovo's competitors would also feel some pressure.

'Competitors will have to accept that the Chinese market will become even harder to crack while international markets will now include a player with a cost structure that can compete with Dell's,' it said.

Sun Microsystems chieftains Scott McNealy and Jonathan Schwartz are already considering the opportunity presented by IBM's withdrawal from the computer market.

'As soon as this deal is done, the first phone call we will make is to the CEO of Lenovo,' Mr McNealy, Sun's brash chairman and chief executive, told reporters on the sidelines of the Oracle OpenWorld conference and exhibition last week.

That phone call would go to Stephen Ward, IBM senior vice-president and general manager of its personal systems group, who will serve as Lenovo's chief executive after the acquisition is completed next year.

Networked computing proponent Sun plans to offer Lenovo its Java desktop system, a low-cost, open-source alternative to the ubiquitous Windows platform.

Mr McNealy said Sun would have 'a better chance of selling the Java desktop to Lenovo than to IBM', which competes directly with Sun in the markets for Unix-based server computers and storage devices.

Mr Schwartz, Sun's president and chief operating officer, has said the Lenovo-IBM deal signifies a change in the computer industry, which is 'moving from the old world, in which one buys a PC and cares a great deal about its comparative hardware features to one in which the hardware is nearly identical, and the value's moved to services available through the device and over the network'.

This change can be traced to the mobile phone market, where network operators offer new handsets for free or at heavily discounted prices as part of their customers' subscription package.

Announcing the deal with Lenovo last week, IBM chairman and chief executive Samuel Palmisano said: 'The PC segment of the industry continues to take on characteristics of the home and consumer electronics industry, which favours enormous economies of scale and a focus on individual users and buyers.'

Mr Schwartz said this was why IBM sold out 'to a company whose principle competitive differentiator is cost'.

Michael Dell, chairman and founder of Dell, said the Lenovo-IBM deal could end up another disappointing merger if history was any guide.

'When was the last time you saw a successful merger in the computer industry?' he said on the sidelines of Oracle OpenWorld. 'I don't see this one as being all that different.'

The harsh assessment referred to what has happened with Dell's main computer rival HP, which acquired Compaq Computer in 2002. Compaq had previously bought out its competitors, including Digital Equipment and Tandem Computer.

Gartner reported that Dell, with annual revenues of almost US$50 billion, has been the most consistently profitable PC supplier over the past several years, well ahead of other global top 10 vendors such as HP, IBM and Lenovo.

Despite the doubts cast on its future, the Lenovo-IBM deal has fuelled talk of more ambitious expansion plans by more Chinese firms through mergers and acquisitions.

Oracle chairman Jeff Henley said the steady globalisation of industries was encouraging mainland firms to make strategic investments in the US and other international markets, in much the same way large Japanese and western European companies did before.

Toa Charm, Asia-Pacific general manager of Hong Kong-listed Kingdee International Software Group, said: 'China's IT leaders are extremely serious about being tomorrow's global IT leaders.'