Lenovo shares continue to sink after news of Motorola deal
The stock is still losing ground almost a week after the Motorola purchase was announced, notes The Wall Street Journal.
Lenovo's stock keeps being battered over concerns about the company's purchase of Motorola, The Wall Street Journal said on Tuesday.
Last Wednesday, Lenovo revealed that it would buy Motorola from Google for $2.9 billion, a deal that will include the device maker's lineup of mobile phones and more than 2,000 patents. Last Thursday, Lenovo shares slipped by 8.2 percent in advance of the Chinese New Year holidays. The stock then fell another 14 percent on Tuesday morning, the first trading day after the holidays.
It's certainly not unusual for an acquiring company's stock to fall following news of a large takeover. Such mergers always taken a bite out of the company's near-term profits, leading more investors to bail. In an investors note released on Monday, Jefferies analyst Ken Hui called the acquisition the "correct move," the Journal said, but acknowledged that it would have a "multiyear negative impact on earnings."
But the Morotola deal is seen as especially risky, in part because Lenovo also has to deal with its $2.3 billion acquisition of IBM's Intel-based server unit. And integrating those two business at the same time may be too much to handle, according to at least one analyst.
"This time, Lenovo is going one step too far," Sanford C. Bernstein analyst Alberto Moel told the Journal.