Feeds

It was inevitable: Lenovo stumps up $2.3bn for IBM System x server biz

7,500 staffers at Big Blue 'expected' to transfer over

Build a business case: developing custom apps

IBM has offloaded its failing x86 biz to Lenovo for $2.3bn, albeit a day later than our sources had predicted.

The pair have entered into a definitive agreement - days after talks were confirmed - which includes System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers, software and maintenance.

According to Gartner, IBM turned over $5.5bn worth of x86 kit in 2010 but by the end of 2012 the unit had increased that to $5.6bn.

Under the terms of the deal, Lenovo will cough $2.07bn in cash with the remainder in stock. The Chinese firm beat off competition from both the new privately-owned Dell and Japanese giant Fujitsu.

This is a massive climbdown from the return that Big Blue execs wanted last spring, when it is understood they were asking for up to $6bn. The continued decline in sales at System x obviously convinced them to get shot for less.

IBM said it will continue to develop and evolve the Windows and Linux software lines for x86 platforms. Lenovo will start to OEM and resell Big Blue's storage kit globally including Storwize disk and tape, General Parallel File System software, SmartCloud Entry and part of IBM's software (Systems Director/ Platform Computing).

After the deal closes, IBM will continue to provide maintenance on behalf of Lenovo "for an extended period of time, so customers should see little change in their maintenance support".

System x employs 7,500 people worldwide and IBM said they are "expected to be offered employment by Lenovo".

So no cast iron guarantees – which is, er... reassuring for the thousands involved.

The System x business has failed to grow since Q3 2011 and posted sales declines in every quarter last year. But Lenovo CEO and chairman Yang Yuanquing obviously thinks his firm can make a difference – which it did with the PC biz it bought from IBM in 2004 for $1.75bn.

"With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, we are confident that we can grow the business successfully for the long term, just as we have done with our world-wide PC business" he said in a statement.

x86 market leader HP will be watching developments very closely, having already relinquished the global PC crown to Lenovo last year. Lenovo currently has a single digit share of the x86 market with its own kit, and is outside of the top five players.

It took the best part of seven years for Lenovo to start firing on all cylinders, and it was only after it started to fine tune the supply chain, reduce channel conflict and introduce rebates that resellers began to flock to the Chinese vendor to promote its wares.

Steve Mills, IBM senior veep and group exec of the software and systems, said the sale allows it to concentrate on areas of tech including cognitive computing, Big Data and cloud.

The transaction is subject to regulatory approval including a nod from the Committee on Foreign Investment in the US. ®

Build a business case: developing custom apps

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Nintend-OH NO! Sorry, Mario – your profits are in another castle
Red-hatted mascot, red-colored logo, red-stained finance books
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.