January 24, 2014
Lenovo To Acquire IBM’s x86 Server Business
Lenovo has said it plans to acquire IBM's x86 server business for approximately $2.3 billion. The x86 server business includes System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking and maintenance operations.
Lenovo acquired IBM's PC business in 2005, which was at times criticized by US interests, such as when the company became an Olympic sponsor, and when the US government became concerned that Lenovo might allow the Chinese government to spy on US government operations and citizens.
"The agreement builds upon a longstanding collaboration that began in 2005 when Lenovo acquired IBM's PC business, which included the ThinkPad line of PCs. In the period since the companies have continued to collaborate in many areas," said an IBM corporate statement.
The unit being acquired by Lenovo is IBM's low-end server business, the Wall Street Journal reports. The new acquisition will help Lenovo expand its business for corporate clients, by offering more than PCs for businesses.
"Lenovo's acquisition fits into a broader trend of China's growing investment in US companies. According to research firm Rhodium Group, the total value of US acquisitions by Chinese entities has more than doubled last year to $13.2 billion from $6.54 billion in 2012," Juro Osawa from the Wall Street Journal wrote.
IBM will retain its System z mainfraims, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances. IBM said it will continue to develop and evolve its Windows and Linux software portfolio for the x86 platform. Lenovo will assume customer service and maintenance operations for IBM's x86 business once the deal is completed. IBM will continue to provide maintenance delivery on Lenovo's behalf so that customers will not see a gap in support.
"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," said Steve Mills, SVP and group executive, IBM Software and Systems, in a corporate statement. "IBM has a proven record of innovation and transformation, which has enabled us to create solutions that are highly valued by our clients."
While the two companies have worked together since 2005, this acquisition may deepen the activities. Lenovo and IBM plan to enter into a strategic relationship that will include a global OEM and reseller agreement for sales of IBM's entry and midrange Storwize disk storage systems, tape storage systems, General Parallel File System software, SmartCloud Entry offering, and elements of IBM's system software portfolio, including System Director and Platform Computing solutions.
"This acquisition demonstrates our willingness to invest in businesses that can help fuel profitable growth and extend our PC Plus strategy," said Yang Yuanqing, chairman and CEO of Lenovo, in a corporate statement. "With the right strategy, great execution, contined 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."