IBM is selling its PC-making business to China's largest personal computer maker, Lenovo, for $1.25 billion, marking the US giant's retreat from an industry it helped pioneer in 1981.
The deal, which forms the world's third-largest PC business, is the latest example of a Chinese company buying a Western brand and manufacturing operations to make its mark on the world stage.
At the same time, it frees IBM to focus on higher-margin businesses such as computer services and software.
"IBM is fairly safe because their goal was to get out of the PC business because they don't make any money out of it. Now Lenovo has to make it a success," said Gartner analyst Mr Martin Gilliland.
The deal, which took 13 months to negotiate, calls for Lenovo to pay IBM $650 million in cash and $600 million in stock. It will also assume $500 million in IBM debt. IBM will hold an 18.9 per cent stake in Lenovo, which will relocate its PC business from Beijing to New York and possibly list shares on Nasdaq or the New York Stock Exchange.
The former IBM PC products will use the IBM logo for up to five years before switching to a Lenovo brand. Lenovo will be under pressure to boost the profitability of the business it is buying, analysts have said.