Lenovo buys IBM server unit for $2.3 billion

Analysts don’t view the acquisition to be expensive but IBM's server unit's earnings have degraded in the past 12 months.

Lenovo, the world's largest PC maker, has struck a $2.3 billion deal to buy IBM’s server unit, reflecting the growing ambitions of Chinese companies to extend their reach.

The deal had been rumoured for some time but talks reportedly broke down last year due to disagreements over valuations.

In the end, the acquisition which includes certain hardware products such as “Blade” and “System x”  was struck at a multiple of 12.3 times the unit's earnings for the financial year ended March 2013.

Lenovo is trading at a multiple of around 17.3 times its 2013 financial year earnings and about 15 times...

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