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June 26, 2017

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Lenovo shares tumble 16.4% in Hong Kong on worries about Motorola

HONG KONG--Shares in Lenovo dived 16.40 percent in Hong Kong Tuesday, with traders worried the Chinese technology giant has bitten off more than it can chew with its US$2.91 billion purchase of struggling handset maker Motorola.

The firm tumbled to HK$8.41 by the close following a more than 8-percent slump on Thursday before the market closed for the Lunar New year holiday.

The purchase of Motorola from Google on Wednesday came a week after Lenovo bought IBM's low-end server business for US$2.3 billion. The deal has spooked investors worried about Motorola's profitability.

The benchmark Hang Seng Index was down 2.89 percent, in line with a regional sell-off after heavy losses on Wall Street sparked by weaker-than-expected U.S. manufacturing data.

"People don't think it will be worth it to pay such a large amount money to acquire Motorola," Core Pacific Yamaichi research analyst Felix Kwok told AFP.

Lenovo in 2013 become the world's biggest PC maker, eight years after buying IBM's PC business.

However, investors do not think the Motorola brand is strong enough to boost Lenovo, Kwok said, adding that the handset maker has been on a downward trend for the past two years.

"Everyone's worried about whether or not Lenovo would be able to turn Motorola from a loss to a profit in short term," Tanrich Securities vice president Jackson Wong told AFP.

Even under Google, Motorola failed to gain traction in a rapidly evolving smartphone market now dominated by South Korea's Samsung and U.S.-based Apple.

Google's inability to make Motorola profitable has sparked doubts about Lenovo's ability to turn the handset maker around, Wong said, adding that there were also worries about how it would fund the purchases.

The U.S. Internet giant's decision to sell Motorola will leave it with a huge loss after buying it for US$12.5 billion in 2011.

Last week's deal provides Lenovo with footholds in smartphone and tablet markets where it is eager to gain traction, while acting as a peace offering to Samsung and other partners that make devices powered by Google-backed Android software.

The deal came just a week after Lenovo said it will buy IBM's low-end server business for US$2.3 billion, giving it a platform to compete in that sector with U.S. giants Dell and Hewlett-Packard.

Tuesday's losses also come after Japanese public broadcaster NHK reported over the weekend that Sony was in talks with Lenovo about plans to set up a personal computer joint venture.

The report said the move was part of Sony's bid to repair its troubled electronics business including the PC division under the Vaio brand.

However, Sony issued a statement on Saturday saying the "report on a possible PC business alliance between Sony and Lenovo is inaccurate."

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