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China’s Lenovo expects IBM server deal to close this week

Company prepares for US market battle; CEO expects $5bn from x86 unit in first year

Mergers and acquisitions, IT Business, Lenovo Group

China's Lenovo Group expects to close its acquisition of IBM Corp's low-end server division on 1 October, paying $2.1bn rather than the previously reported $2.3bn, Reuters reported.

The discount is reportedly due to revised valuation of inventory and some outstanding liabilities. Approximately $1.8bn will be in cash and the remainder in stock.

The deal will position Lenovo to expand its US enterprise client base as the world's newly minted PC market leader attempts to diversify in the face of a dwindling desktop and notebook market. The company has also agreed to pay $2.9bn for Google Inc's loss-making Motorola smartphone unit.

"In the large and medium enterprise space we can now fully leverage IBM technology to compete with brands like HP and Dell," said Lenovo CEO, Yang Yuanqing, who believes the IBM deal will open a new "growth engine" with higher margins than PCs and generate $5bn in its first year. Lenovo currently trails Dell and HP in x86 server market share.