Lenovo has reached an agreement with Hong Kong communications conglomerate PCCW to create a jointly owned services company, advancing its services growth strategy.
PCCW operates a software-defined network globally, some of which uses its own undersea cables. The company also owns PCCW Solutions – an IT services provider with a large footprint in Hong Kong, mainland China and parts of Southeast Asia.
Lenovo and PCCW Solutions will create an entity called PCCW Lenovo Technology Solutions (PLTS) which will see the Chinese kit maker and Hong Kong-based services company offer “one-stop customer solutions that integrate services, devices and digital infrastructure “, according to a joint agreement. Lenovo/PCCW announcement.
Both companies believe this plan will work due to the growing demand for IT services. Lenovo is so confident that it is handing over $513.6 million in cash and $100 million in Lenovo stock. PCCW will receive 86,424,677 Lenovo shares. Upon completion of the deal, Lenovo will own 84% of PLTS, consisting of 80% direct ownership of the new entity plus a 20% stake in PCCW Network Services – the holding company of PCCW Solutions.
Lenovo already operates a Solutions and Services Group (SSG) which in fiscal year 21/22 grew revenue 30% year-over-year to $5.4 billion and generated operating profit of $1.2 billion. Much of this growth has come from TruScale, Lenovo’s IT-as-a-service offering. The Services organization far outpaced the growth of Lenovo’s Smart Devices Group (PCs and other personal electronic devices) and Infrastructure Solutions Group (servers, storage and networking).
During the company’s latest earnings call, the group’s chief financial officer, Wai Wong, told investors that SSG was a “well-established growth engine for the group”.
“Structural opportunities will emerge from digitization and post-pandemic changes in the workplace. This change will increase demand for premium TruScale-as-a-Service solutions, sustainability and vertical solutions. SSG will continue to expand its service offering in this area while strengthening channel – and cooperation with business partners.”
The deal with PCCW Solutions certainly expands Lenovo’s business –– potentially beyond the Asian markets the organization currently serves — as its operations include outsourcing centers in Malaysia and the Philippines. If Lenovo’s global sales force can funnel work to these facilities, things could get interesting.
PCCW Solutions also offers managed services, application development and systems integration. He even operates a digital marketing agency. ®