EMC (NYSE:EMC) and Lenovo Group Ltd. have entered into a strategic partnership where the leading PC maker will resell storage equipment and servers made by EMC. China will be used as a test location before expanding to other locations. China is the world’s second largest economy and EMC will gain a foothold in this massive market with this partnership. The partnership also opens up markets outside Asia for Lenovo and it will expand into products besides personal computers in Asia. The companies will also form a joint venture that will be in the business of selling storage equipment to small and mid-sized businesses. Lenovo will own 51 percent of the venture and will be contributing an undisclosed cash sum. 
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EMC had a similar partnership with Dell to resell storage hardware that ended in the later part of 2011 and the Lenovo partnership is likely to be along the same lines. EMC has very low penetration into the growing Chinese market and we expect storage revenues to be bumped up significantly in the long term due to this deal. The Chinese market is key to fend off the slowdown in demand in the Eurozone. The companies also issued guidance that the partnership will not have material impact in the current fiscal year.
Information Storage is the most valuable division of EMC and constitutes nearly 43% of our current Trefis price estimate of EMC. We have a $52 Trefis price estimate for EMC, which is significantly higher than the current market price.Notes: