Lenovo Group has agreed to transfer its non-telecoms information technology services business to AsiaInfo Holdings, an IT solutions provider in China, as part of a new strategic alliance. The transaction, valued at US$36.3 million, will merge Lenovo's IT services division with Nasdaq-listed AsiaInfo's enterprise information solutions unit to form Lenovo-AsiaInfo. It is expected to boost AsiaInfo's net revenues by 40 to 50 per cent. The move by China's largest personal computer retailer may signal its plan to offload its non-core assets, allowing it to focus on stemming the erosion of its regional PC market share to foreign rivals. Three years ago, Lenovo attempted to transform itself from a PC manufacturer into an IT services firm modelled after IBM, but the effort has yet to pay off. Lenovo's IT services division generated US$29.6 million, or 2.4 per cent, of the PC maker's total revenue in the fiscal year ended March 31. It commands a paltry 3.5 per cent of the Chinese market, behind IBM at 11 per cent and Hewlett-Packard at 8 per cent. Asked whether the sale showed Lenovo's IT services business model had failed, BNP Paribas analyst Marvin Lo said it was hard to be sure. 'It's a very competitive market - there are lots of companies involved,' Mr Lo said. 'Lenovo didn't have much of a history in IT services. One of the key things you need in that industry is a proven track record.' Lenovo president Yang Yuanqing said the alliance underscored the company's commitment to the sector, not a withdrawal. 'We have been adopting innovative approaches to develop the [IT services] business,' he said. 'The co-operation with AsiaInfo is in line with Lenovo's long-term plan. 'We believe this new approach will promote IT services business development.' Mr Lo is sceptical. 'The last time [Lenovo] reported results, their PC business was in great shape,' he noted. 'The slow growth on the bottom line was due to their non-PC business, such as IT services.' Lenovo's PCs have 12.1 per cent of the market in the Asia-Pacific region outside Japan, down from 12.6 per cent a year ago.