Lenovo expands SSG products with acquisition of PCCW solution

Strategic relationships are common in the technology industry and typically enable the vendors involved to better serve shared customers and markets. However, some vendors, such as Lenovo, are very proficient in setting up and evolving strategic relationships, with even greater benefits and consequences.

This is especially true for enterprise-focused organizations, including: Infrastructure Solutions Group (ISG) And that Solution and Service Group (SSG) That Lenovo Launched over a year ago..

recently, Establishment of PCCW Renovo Technology Solutions (PLTS) announced by the company Lenovo’s approach to M & A and strategic relationships clearly demonstrates that it is not “one size for everything.” Instead, it is likely to get significant value from this investment, and the company says it expects margins to increase soon. Let’s consider it in more detail.

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Why get features from PCCW?

So what exactly is PCCW and why is it a valuable strategic ally for Lenovo?

Headquartered in Hong Kong, PCCW Solutions is a leading IT and Business process outsourcing We provide providers in Hong Kong, mainland China and Southeast Asia with deep expertise and proven solutions in the telecom, transportation, public sector and financial services industries. Its parent company, PCCW, is a global company with more than 20,000 employees and owns a majority stake in a major Hong Kong company. Telecommunications Service providers HKT Trust and HKT Limited are top operators of broadband, fixed line, mobile communications and media entertainment services.

These final points are essential to understanding why Lenovo is acquiring the PCCW solution capabilities to form PLTS.Both companies have a significant amount of business in the Asia Pacific (AP) region (AP and China account for more than 40% of Lenovo’s total revenue. Latest financial results announcement).

In addition, this partnership underscores Lenovo’s SSG business. It has grown 30% over the past year and has generated $ 5.4 billion in global revenue. This transaction could increase SSG’s AP revenue by up to 50% in the short term.

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Lenovo + PCCW = PLTS

How accurately is the partnership formed? Partly by managing Lenovo’s majority investment in a new company called PCCW Lenovo Technology Solutions (PLTS).

Upon completion of the transaction, Lenovo will have a substantial 84% stake in PLTS through a direct 80% stake in PLTS and a 20% stake in PCCW Network Services, the holding company for PCCW’s remaining IT solution obligations in Hong Kong. Become a shareholder. PLTS will focus on expanding activities across the Asia Pacific region. It believes Lenovo and PCCW will have more than $ 300 billion in addressable IT services market opportunities.

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Final analysis

What are the key points from this announcement and the new company?

First, the contract with PCCW includes significantly greater investment than Lenovo has made in recent M & A history and other strategic partnerships. The two companies said the share exchange structure with PCCW reflects “the long-term commitment and trust of both parties in a strategic partnership.”

It’s also worth noting that this deal is much more modest and much less risky than other enterprise vendors desperately trying to start a services business.This kind of short-sighted practice poster child HP’s 2008 acquisition of EDS for $ 13.9 billion And a $ 8 billion write-down that occurred when it became clear that the transaction went bankrupt four years later.

In comparison, the Lenovo / PCCW agreement seems to be largely curtailed.

But partnerships also need to thrive, in part, by Lenovo plans to double its R & D investment and hire up to 12,000 R & D professionals worldwide by 2025... The company’s main focus is on developing new, innovative intelligent transformation solutions and services centered on the “Client-Edge-Cloud-Network-Intelligence” architecture, focusing on a short, medium and long three-track approach. I’m guessing. In return for the period.

In other words, even if PLTS gets on track in Lenovo and PCCW’s key markets, it could still benefit from sustainable, targeted strategic investments from its key owners. Overall, the strategic partnership between Lenovo and PCCW and the resulting PLTS services organization must provide companies and their respective customers and prospects with substantial benefits and business opportunities.

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