Let's Make a Bubble
I'm reading through some old stories in my aggregator tonight getting caught up, and in reading a story back from March 2005 that discussed the rise of chinese brands and business, this quote caught my attention.
Lenovo Group, China’s leading PC vendor, agreed to pay about $1.8 billion in cash and equity for IBM’s PC business. Overnight, Lenovo became the world’s third-largest personal computing company, with a worldwide market share of about 8%. (The leader, Dell, has about 18%.)
- via Fusionbrand
In December 2004, Lenovo's valuation (how much their company is worth) was approximately $3 billion.
As of today, its almost $3.25 billion.
Almost two years later, the overall value of the company has only grown around 6%. Lenovo could have put their money in a savings accounts and created more value for their shareholders.
When the deal went down, all Lenovo and IBM talked about was the synergies the deal would create, about buying a big established brand, the value of key technical assets, the upside associated with their intensely loyal customers.
A lot of this this sounds a lot like the reasons being floated by Google about why they bought YouTube.
I'm not sure I'm buying it anymore than Lenovo's shareholders are.
See this post as it first appeared on Blogware.