Thursday, April 23, 2009

Should Lenovo buy IBM PCD?

Business school is interesting to me since there are always a lot of role-play opportunities. In the role play, we can be senior managers, outrageous employees, bankers, board members and so on. This week, my fellow classmates and me are bankers helping Lenovo bidding for IBM's PCD division during the synthesis seminar, one of the newly created classes in our class.

It's interesting to look back at the deal again, and debate among ourselves on whether Lenovo should buy the PCD division from IBM. There are definitely a lot of downside and risks in doing that. However, I can sense the excitement of Lenovo managers when they first thought about the deal. such a great opportunity to expand to the global market. From our analysis though, the risk is also pretty high. Even IBM can't make it profitable, and how can Lenovo do that considering the cost saving will be very limited. Is there any other good target needing less money than 2 billion plus? Sure, there are, though not glorious.

Financial Times made the M&A the front page on Thursday, talking about M&A market are coming back. However, how many of them will work? A perfect business model for me will be to grow organically step by step, and that's the way to build a long-term business. Oracle may be too rich to keep the $7.1 billion in its pocket, but is Sun a good choice? and how much synergy can it bring?

It's a crazy world now, and I believe cash is King, always.

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