Bloomberg News

Lenovo Makes First Software Buy to Expand in Cloud Computing

September 18, 2012

Lenovo Makes First Software Buy to Expand in Cloud Computing

A sales clerk stands in a Lenovo Group Ltd. store inside a computer market in in Beijing, China. Photographer: Doug Kanter/Bloomberg

Lenovo Group Ltd. (992), the world’s second-largest maker of personal computers, agreed to buy Stoneware Inc. of the U.S. to gain cloud-computing products in its first acquisition of a software vendor.

Stoneware produces software used mainly by governments and schools to synchronize data across multiple mobile devices, Mark Cohen, a Lenovo vice president, said in a telephone interview. The closely held, Indianapolis-based company has 60 employees, he said, without disclosing terms.

The purchase is Lenovo’s second in less than three weeks as Chief Executive Officer Yang Yuanqing expands the company to take on rivals including Apple Inc. (AAPL:US) and Samsung Electronics Co. in smartphones, tablets and Internet-ready televisions. Lenovo will use Stoneware to build a “public cloud” for consumers, Cohen said. The service would compete with Apple’s iCloud, which lets users store music, movies and applications and access them by the Internet and wirelessly.

The acquisition “helps us access and interface with users in a way that we haven’t been able to do,” Cohen said. “We are not trying to remake ourselves into a software company. What we’re trying to do is selectively enter the software market where we can make a difference for our customers, and to support our overall strategy.”

Lenovo shares gained 0.5 percent to close at HK$6.35 in Hong Kong trading, compared with a 0.3 percent drop in the benchmark Hang Seng Index. They have gained 23 percent this year, compared with a 12 percent rise in the Hang Seng.

Cloud Computing

Lenovo, whose headquarters are in Beijing and Morrisville, North Carolina, has focused previous acquisitions on hardware. It bought the PC division of International Business Machines Corp. in 2005. Last year, the company acquired control of Medion AG (MDN), an Essen, Germany-based computer maker, and the PC unit of Tokyo-based NEC Corp. (6701)

On Sept. 5, Lenovo announced plans to buy the Sao Paulo, Brazil-based consumer-electronics group known as CCE for about $147 million.

Cloud computing refers to data and software stored in “clouds” of servers that can be accessed anywhere by devices with Web access, including smartphones and tablet computers.

Lenovo has been in a partnership to re-sell Stoneware’s software for the past two years, during which time the company’s revenue doubled, Stoneware Chief Executive officer Rick German said in an interview, without supplying more specific details.

Tablets, Smartphones

“We hope to do far better than that as we come together,” German said. The software maker is profitable and was founded in 2000, he said.

The transaction is expected to close by the end of this year, Cohen said.

Lenovo will expand Stoneware’s cloud-computing offerings to consumers in “the next couple quarters,” Cohen said. Owning Stoneware will allow Lenovo to more closely integrate its software with the company’s line of tablets and smartphones, Cohen said.

“We’ll do it in a way that the device matters,” Cohen said. “We’ll exploit the capabilities of the device with the software, ensuring better devices that run better in the cloud.”

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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