IBM Admits to Selling PC Division to Lenovo to Please the Chinese Government

IBMIn 2005, Lenono acquired IBM’s PC business to instantly become the third largest PC supplier in the world, edging out Dell and others who were also vying for the massive and profitable division.

Now, Samuel J. Palmisano, who has successfully led IBM through the past decade, has revealed that Lenovo was picked as a buyer due to political considerations. Palmisano fought off intense internal opposition against selling the PC division as he was convinced that the real opportunity to innovate and shine was elsewhere. His decision led to IBM losing its title of the world’s largest information technology company, but resulted in generating more value for shareholders.

Palminaso revealed to NYTimes that he deflected overtures from Dell and private equity firms and sold to Lenovo to please the Chinese government. The Chinese government wants its corporations to expand globally, and by helping Lenovo fulfill that national goal IBM was hoping to get into the good books of the government. China, where the government still wields a large amount of influence, is a lucrative market for IBM. The Chinese government is also a stakeholder in Lenovo thanks to investments by the state-owned Chinese Academy of Sciences.

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