Lenovo to form venture with Hong Kong comms conglomerate PCCW
Gains access to offshoring centers in Malaysia and Philippines
Lenovo has struck an agreement with Hong Kong comms conglomerate PCCW to create a jointly owned services company, advancing its strategy of growth through services.
PCCW operates a globe-spanning software-defined network, some of which uses its own submarine cables. The company also owns PCCW Solutions – an IT services provider with a big footprint in Hong Kong, mainland China, and parts of Southeast Asia.
Lenovo and PCCW Solutions will create an entity dubbed PCCW Lenovo Technology Solutions (PLTS) that will see the Chinese kit-maker and the Hong Kong services company offer "one-stop customer solutions that integrate services, devices and digital infrastructure" according to a joint Lenovo/PCCW announcement.
Both companies believe this plan will work because of rising demand for IT services. Lenovo is so confident it's handing over $513.6 million in cash and $100 million in Lenovo shares. PCCW will be granted 86,424,677 Lenovo shares. Once the deal is done Lenovo will own an effective 84 percent of PLTS, made up of direct ownership of 80 percent of the new entity plus a 20 percent stake in PCCW Network Services – the holding company of PCCW Solutions.
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Lenovo already operates a Solutions and Services Group (SSG) that in FY 21/22 grew revenue grew 30 percent year-on-year to reach $5.4 billion and deliver operating profit of $1.2 billion. Plenty of that growth came from TruScale, Lenovo's IT-as-a-service offering. The services org handily outpaced growth in Lenovo's intelligent devices group (PCs and other personal electronics) and infrastructure solutions group (servers, storage and networking).
On the company's most recent earnings call, group CFO Wai Wong told investors SSG is a "well-established growth engine for the group."
"Structural opportunities will emerge from digitalization and post-pandemic changes in the workplace. The shift will increase the demand for premier TruScale-as-a-Service surface, sustainability and vertical solutions. SSG will continue to broaden its service offering in this area while strengthening channel – and cooperation with business partners."
The deal with PCCW Solutions certainly broadens Lenovo's activities – potentially beyond the Asian markets the org currently serves – because its operations include outsourcing centers in Malaysia and The Philippines. If Lenovo's global salesforce can funnel work to those facilities, things could get interesting.
PCCW Solutions also offers managed services, application development, and system integration. It even operates a digital marketing agency. ®