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UPDATE 2-China's Lenovo says will not buy Positivo now

Thu Dec 18, 2008 5:33am EST

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(Adds analyst comments, share price details)

By Kirby Chien

BEIJING, Dec 18 (Reuters) - China's Lenovo Group (0992.HK), the world's No.4 personal computer maker, said on Thursday it had discussed buying Positivo Informatica SA (POSI3.SA), Brazil's top PC maker, but an acquisition in the current climate was not possible.

"Lenovo and Positivo agree that given the current economic turmoil and uncertainties, it is not feasible to reach an agreement on a transaction at this time," Angela Lee, a Lenovo spokesperson based in Hong Kong, told Reuters.

Lenovo, along with global rivals such as Dell (DELL.O), face slowing demand as the world economy struggles with recession and companies cut back on tech spending.

Lenovo continues to look at ways to grow its business, said Lee, who did not rule out an acquisition at some time. "The companies are exploring a broad strategic alliance that would create long-term shareholder value for both companies," she said.

Given the rapidly deteriorating conditions in the global economy, it was probably a good thing that Lenovo walked away from an acquisition, said Antonio Wang, analyst with market research firm IDC.

"In just a few short weeks the conditions in the global economy have changed drastically," he said. "It is a prudent decision on Lenovo's part to be less aggressive with Positivo."

Lenovo shares closed up 2.7 percent in a late rally, beating the broader Hang Seng Index .HSI which ended 0.24 percent higher.

IDC's Wang also said Positivo's owners could have been reluctant to sell on the cheap. Positivo shares have fallen about 80 percent this year, valuing the company at around just $420 million.

Lenovo has about $2 billion cash on hand that it could use for acquisitions, according to Daiwa Research, and the PC maker has said it is looking for acquisitions amid an expected industry consolidation, but has not named any potential targets.

Brazilian media have reported that both Lenovo and possibly larger rival Dell were interested in Positivo. ($=6.83 yuan) (Editing by Ian Geoghegan)



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