Lenovo signs end-user services deal with IBM

Lenovo has signed a five-year services agreement with IBM that could be worth up to US$245 million

Lenovo Group has signed a five-year deal with IBM to provide services and support to its customers. The deal, outlined in a filing with the Hong Kong stock exchange Tuesday, could be worth up to US$245 million for IBM over the term of the contract.

Lenovo plans to expand the services it offers customers with the addition of "fee-based technical support, installation, deployment and other PC-related services," the filing said. The company did not detail when these services would be offered to customers.

After considering several service providers, Lenovo chose to outsource these functions to IBM, which is one of the company's largest investors, because the company has an established worldwide services organization and an existing business relationship with Lenovo.

Lenovo expects the deal to generate payments to IBM of US$15 million during its current 2006-07 fiscal year, which ends on March 31. That amount is expected to rise to $35 million during the company's next fiscal year, 2007-08, and US$45 million during 2008-09. These payments may increase further to US$50 million annually during the 2009-10, 2010-11, and 2011-12 fiscal years, Lenovo said in the filing.

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