After a week of rumour IBM has sold its PC division to Lenovo for $1.75bn and an 18.8 per cent stake in the Chinese manufacturer.

The deal quadruples Lenovo's market share to make it the world's third largest PC manufacturer. It also includes sharing of IBM's worldwide sales offices and R&D facilities, and will be completed by the middle of 2005.

Chuanzhi Liu, current chairman of Lenovo Group, said: "As Lenovo's founder, I am excited by this breakthrough in Lenovo's journey towards becoming an international company.

"Over the past 20 years, I've watched Lenovo develop into the leading IT company in China and throughout Asia. Since the beginning, however, our unwavering goal has been to create a truly international enterprise."

Founded in 1984, Lenovo, formerly Legend, was the first company to introduce the home computer in the People's Republic of China, and since 1997 has been the leading PC brand in China and across Asia with annual revenues of approximately $3bn.

Big Blue's first PC from rolled off the lines in 1981 and last year the division generated revenues of $9bn.

IBM chief executive Sam Palmisano, who formerly ran the PC division, commented: "Over the past several years, we have aggressively repositioned IBM to be the world's leading provider of innovation-enabled solutions for businesses and institutions of all sizes, in all industries.

"This requires single-minded focus on the business client and significant ongoing investments in R&D and the creation of intellectual capital.

"At the same time, the PC segment of the industry continues to take on characteristics of the home and consumer electronics industry, which favours enormous economies of scale and a focus on individual users and buyers."

Lenovo will pay $650m in cash and $600m in stock, and will assume $500m of debt. Over 10,000 IBM employees, a quarter in the US, will join the Chinese company and no redundancies are expected.