Lenovo acquires Sanmina unit in American push

PUBLISHED : Wednesday, 20 February, 2008, 12:00am
UPDATED : Wednesday, 20 February, 2008, 12:00am


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Lenovo Group has agreed to acquire the Mexican personal computer business of Sanmina-SCI Corp for an undisclosed sum, marking the mainland technology giant's first big acquisition since it bought IBM's personal computer division in 2005.

Sanmina, an electronics contract manufacturer based in California, is selling its personal computer business as part of a restructuring plan.

The company makes personal computers and components for IBM in North America. It also makes other electronic components for the defence, aerospace, medical and vehicle industries.

Sanmina said it had entered into a non-binding memorandum of understanding to sell its personal computing operation and other related assets in Mexico to Lenovo.

The operations are based in Monterrey, a key industrial city and capital of the northeastern Mexican state of Nuevo Leon. Financial terms were not given.

For Lenovo, the deal with Sanmina will provide it with greater manufacturing capacity to bolster its push into consumer personal computers and servers for small and medium-sized businesses in the highly competitive North American market.

A spokeswoman for Lenovo in Hong Kong would not comment on the Sanmina announcement.

Last year, Lenovo was thwarted in its attempt to buy European computer supplier Packard Bell, which was ultimately snapped up by US vendor Gateway with funding from parent firm Acer.

'The [Sanmina] deal makes sense for Lenovo, which is keen to establish an overseas manufacturing network to support its international expansion plans,' said Joseph Ho, an analyst at Daiwa Institute of Research.

In July last year, Lenovo said it was investing more than US$30 million to build new manufacturing plants and order-fulfilment centres in Baddi, India, and in Monterrey to support regional requirements.

The Sanmina plant is expected to complement Lenovo's new 24,155 square metre Monterrey facility, which is due to start up in the middle of this year.

Lenovo's other plants are in Beijing, Huiyang, Shanghai, Shenzhen, North Carolina and Pondicherry, India.

Sanmina also said it had agreed to sell certain assets of its personal computer business and associated logistic services to Foxteq Holdings, a unit of Taiwanese electronics contract manufacturer Foxconn Technology Group, for 'US$80 million to US$90 million'.

'We anticipate that the financial benefits of these initiatives, along with the total proceeds from these transactions and other related disposals, will be in excess of US$200 million,' said June Sola, chairman and chief executive of Sanmina.

Lenovo's sales for the fiscal year to March are projected to grow 14.82 per cent to HK$130.98 billion from HK$113.99 billion the previous year, according to a Thomson Financial consensus estimate in a survey of 17 brokers.

The firm's net profit is forecast to jump 154.06 per cent to HK$3.2 billion from HK$1.26 billion a year ago.

Major acquisition

Deal bolsters Lenovo's expansion in North American market

Lenovo sales for its financial year are projected to grow 14.82 per cent to, in HK$131b