It's official -- China's largest personal computer maker, Lenovo Group Ltd, is buying control of IBM's PC-making business for $1.25 billion, completing IBM's retreat from the business it created in 1981.

Lenovo will become the world's third largest PC manufacturer, after Dell and Hewlett-Packard/Compaq. IBM will hold an 18.9% stake in Lenovo. Stephen M. Ward Jr from IBM will take over as the new Lenovo CEO.

The sale of IBM's PC desktop and notebook computer lines frees the company to focus on higher-margin businesses such as computer services, software, more powerful server computers, and storage as well as computer chips, analysts say.

Lenovo, formerly known as Legend, will take ownership of the IBM "Think" trademark family, including its ThinkPad notebook brand and its ThinkCenter desktop line. Lenovo will hire 10,000 IBM PC employees - including about 2,300 in the United States.

Founded in 1984, Lenovo was the first company to introduce the home computer concept in China, and since 1997 has been the leading PC brand in China.

Lenovo is entering treacherous waters. Dell's emphasis on cost control and aggressive direct marketing have swamped nearly every other major manufacturer in the U.S. Gateway has suffered major erosion in the last few years and many analysts expect Hewlett-Packard will exit the PC business within the next few years.