AsiaInfo Holdings, Inc., a provider of software, solutions and services to telecom operators and enterprises in China, today announced that it has signed a definitive agreement with the Lenovo Group to acquire Lenovo's non-telecom related IT services business in a stock transaction valued at US$36.3 million (CNY300 million).

Lenovo's IT services business being transferred had estimated revenues of US$29.6 million (CNY 245 million) for the most recent fiscal year ended March 31, 2004. A new division of AsiaInfo, to be named Lenovo-AsiaInfo, will be formed from the combination of the Lenovo IT services business being acquired and AsiaInfo's existing enterprise information solutions (EIS) business unit. It is hoped that Lenovo-AsiaInfo will be a leading IT services provider in China, offering solutions including security products and services, management consulting, e-HRM and business intelligence, e-government and financial solutions to Chinese enterprises in multiple vertical industries.

The new division is expected to add 40% to 50% to AsiaInfo's net revenues within twelve months from closing and is expected to realize significant cost synergies through consolidation of administrative infrastructure and revenue synergies through cross-selling opportunities. More importantly, the new division will provide a solid platform for AsiaInfo to accelerate its expansion from its core telecom business into the enterprise sector with its current and planned offerings of software products and services. The company noted that most of the incremental revenue growth expected is anticipated to come from customers in vertical industries other than telecom.

According to the Chinese research firm CCW, overall IT spending in China will reachUS$71 billion in 2008, representing a compound annual growth rate of 18.5%. The majority of growth will come from IT software and services, which is expected to grow approximately 28% annually to become a US$32 billion market in 2008.