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Lenovo will buy IBM's x86 server business for $2.3bn

It's the biggest ever technology acquisition by a Chinese company
Thu Jan 23 2014, 11:31
IBM logo in black with white text

CHINESE COMPUTER MAKER Lenovo has agreed to buy IBM's x86 server business for a tidy sum of $2.3bn, equivalent to about £1.38bn.

The news arrives on the heels of persistent rumours about the deal, which is regarded as the biggest information technology acquisition so far by a Chinese company.

The move comes nine years after Lenovo bought IBM's PC businesss including the Thinkpad PC notebook brand and means that IBM will let go of its entry-level and mid-range server and storage products. These include IBM's System x series servers, Bladecenter servers, Flex System blade servers and switches, x86 based Flex integrated systems, Nextscale and iDataplex servers and their associated software as well as its blade networking and maintenance operations.

The deal also includes a strategic OEM agreement for Lenovo to sell IBM's entry-level and mid-range storage products including Storwize disk and tape storage systems, General Parallel File System software and Smartcloud Entry.

However, IBM isn't selling its soul to the Chinese. It will retain its high-end server products that include its System z series mainframes, Power Systems, Storage Systems, Power-based Flex servers, and Pureapplication and Puredata appliances. IBM will also continue to develop systems software such its proprietary System z for mainframes and AIX version of Unix for Power systems as well as Linux for x86 systems.

The move is expected to see about 7,500 IBM employees offered jobs with Lenovo, the two firms said.

IBM group executive for Software and Systems Steve Mills said that the deal will allow IBM to invest in other areas. He said, "This divestiture allows IBM to focus on system and software innovations that bring new kinds of value to strategic areas of our business, such as cognitive computing, big data and cloud.

"IBM has a proven record of innovation and transformation, which has enabled us to create solutions that are highly valued by our clients."

Lenovo CEO Yang Yuanqing added, "This acquisition demonstrates our willingness to invest in businesses that can help fuel profitable growth and extend our PC Plus strategy. With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, we are confident that we can grow this business successfully for the long-term, just as we have done with our worldwide PC business."

IBM's mid-range hardware business has seen steady sales declines in recent quarters. The information technology giant posted worse than expected financial results for the third quarter 2013, with a four percent decline in revenues thanks to dwindling hardware sales and a weak market in China.

While the deal with Lenovo is being completed the companies won't make changes to their independent existing server operations, including customer service and product availability. µ

 

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