Lenovo is to buy German laptop and consumer electronics firm Medion for $900m in a bid to expand its position in developed economies and increase its market strength.
The deal is the biggest for Lenovo since acquiring IBM's laptop business in 2005, and will help the firm gain a stronger position in Europe, although news of the deal saw the company's share price drop as investors questioned the decision.
Nevertheless, Lenovo chief executive Yang Yuanqing was bullish about the deal, arguing that it is a "bold move" that will combine both companies' expertise to strengthen its position.
"With strong consumer sales, marketing, services and retail capabilities, Medion's business is perfectly aligned with our consumer growth strategy in western Europe," he said.
"Bringing together this 'front end' with Lenovo's 'back end' manufacturing capability and supply chain will make both companies even more successful and competitive."
Yuanqing added that Lenovo will be better placed to win market share in the growing mobile internet sector, where tablets such as the iPad and Galaxy Tab are eroding laptop market share.
The deal will be financed purely with cash, and is expected to close in the third quarter of 2011.
Lenovo recently unveiled the latest addition to its ThinkPad Edge laptop range with the ThinkPad X1 aimed at small to medium sized businesses with a lower price tag.
Roger Kay, founder and president at analyst firm Endpoint Technolgies Associates, told V3.co.uk that acquiring Medion could give Lenovo a solid foothold in the European PC market.
"In the last couple of years Lenovo has moved ahead, especially in China, but they had a notably weak position in Europe," he said.
"It is a good way to get a solid foothold in a major European market. Since Lenovo has done well in China, and has money to spend, it seems like a good match."
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