Lenovo punished by downgrades over Motorola Mobility acquisition deal

Computer giant Lenovo, which announced US$5 billion worth of deals last month to bolster its server and smartphone businesses, saw its shares plunge the most in five years yesterday after the stock was downgraded by at least five brokerages.

Lenovo fell 16.4 per cent to close at HK$8.41 on the first day of trading of the Year of the Horse - marking its biggest decline since January 2009.

The world's biggest supplier of personal computers was downgraded by UBS, Morgan Stanley, Jefferies Group, JI-Asia Research and Kim Eng Securities.

Lenovo chief executive Yang Yuanqing announced his company's two biggest acquisitions last month as he seeks growth drivers to help weather a slump in global personal computer shipments.

The purchase of International Business Machines' low-end x86 server unit delivers corporate clients, while the follow-up deal for Google's Motorola Mobility mobile-phone unit was criticised for adding an unprofitable business with shrinking sales.

"We expect a negative impact on Lenovo's net profit - at least in the near term - from the acquisition of Motorola Mobility," Morgan Stanley analysts, led by Grace Chen, said in a report.

"It will take some time before Lenovo turns the business profitable."