Enterprise

Lenovo finally walks away with IBM’s low-end server business for $2.3B

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The deal is done: IBM has sold multiple lines of low-end data center equipment to Lenovo for around $2.3 billion.

Yesterday we got some indication the deal was close to completion, and now everything is official.

Lenovo gets 7,500 employees from Big Blue and multiple collections of server models that accord with the widely used x86 chip instruction set, as well as some networking switches. That’s according to Lenovo’s press release announcing the deal:

This 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.

On top of that, the two companies will work together to resell some of IBM’s hard disk and tape storage products.

The deal comes nine months after news broke about Lenovo’s interest in IBM’s low-end server business. The $2.3 billion figure for today’s deal is substantially lower than what IBM might have been hoping for earlier. Last year IBM sought as much as $6 billion for the transaction, Reuters reported.

Fuss about the price aside, the sale could yield benefits for both involved parties.

IBM won’t have to spend so much time and money selling hardware in the cloud computing age, which is becoming harder. Instead it can focus more on software, which can have considerably higher margins than low-end servers. And it should also be able to allocate more resources to its public cloud campaign, where it sells highly scalable compute power by the hour. That’s a growing market, for IBM and many other cloud providers.

That doesn’t mean Lenovo gets the short end of the stick. Based in Beijing and Morrisville, N.C., Lenovo is now in line to add to its customer list a bunch of big businesses that have previously bought hardware from IBM. Lenovo should be able to buy server and switch components in bigger scale because it will have more customers to sell to. That means Lenovo might be able to save a bit of money per part.

And remember, Lenovo has gotten plenty of mileage out of the personal computers it got from IBM back in 2004, even though at the time some thought that deal wasn’t smart for Lenovo. Perhaps Lenovo will be able to follow that trajectory with its new data center gear.

More about the companies and people from this article:

International Business Machines Corporation, abbreviated IBM and nicknamed Big Blue (for its official corporate color), is a global technology and innovation company headquartered in the Northeast US. IBM is the largest technology and ... read more »

With over $30B+ in sales, Lenovo is the fastest growing major PC maker. The company climbed to number 2 in worldwide PC market share and continues its fast ascent. Today, Lenovo is a global corporation with significant operations o... read more »

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