January 29, 5: The full text can be found at the bottom of this article.
The assets covered by the deal include the System x rack servers, BladeCenter and Flex System blade servers and switches, xbased Flex integrated systems, NeXtScale and iDataPlex servers and associated software, Enterprise X-Architecture technologies, and blade networking and maintenance operations; IBM will continue to develop and evolve Windows and Linux software for x86 platforms.
In turn, Lenovo will become IBM's preferred vendor of x86 server solutions. Timing, Price, Scope Rumors of a deal had been floating around for months, and though a few new permutations recently arose around Dell's supposed interest, most assumptions focused on the timing, scope and price of a deal instead of its likelihood.
While this was partly practical -- you don't hammer out a multibillion dollar agreement or exit a major market overnight -- the deal also did not impinge on two recent major IBM announcements: The deal highlights Lenovo's ongoing progress in developing data center solutions and also punctuates the business endpoint announcements Lenovo made at CES The timing of the announcement was good for both companies.
That may be the case, but final prices depend more on buyer willingness than seller desire. There was speculation that IBM would hold back the Flex System and EXA assets -- but from a competitive standpoint, Lenovo would have been foolish to settle for anything less than the whole package, since high-end offerings deliver distinctly better value and margins than high-volume solutions.
The price is at least partly mitigated by IBM deepening its relationship with a long-trusted strategic partner. If and when IBM customers want x86 servers, Lenovo can supply them.
More tangibly, the proceeds of the sale essentially will pay for IBM's new Watson project and business unit, as well as its cloud data center expansion efforts announced earlier this month.
The price is good for both companies. That will make Lenovo an immediate player in numerous markets that were well-beyond its previous grasp.
While IBM has long trailed Dell and HP in volume x86 servers, it has been the market leader in 4-way and above x86 server solutions for years, a position Lenovo should now fill with ease. The deal also allows IBM to gracefully exit an x86 server market it considers essentially commoditized, keeping to an established strategy that saw previous sales of once-core company solutions, including PCs, hard disk drives and enterprise printers.
Finally, selling System x should help IBM focus its attention and resources on the cloud services and cognitive computing solutions it believes are central to its future success.
The deal's scope provides good value to both companies. Critical Relationships Perhaps the most important aspect of this acquisition, as with every IT deal, is the human element.
Lenovo's expecting to employ some 7, current System x employees based in Raleigh, Shanghai, Shenzhen and Taipei, including System x leadership, management and sales executives. This reflects the strategy Lenovo pursued after purchasing IBM's PC division inand it is absolutely critical from a business continuity standpoint.
Those IBM workers deeply understand the System x portfolio, and they have practical, ongoing relationships with IBM customers that would be difficult or impossible to replicate.
Overall, this deal will yield positive results for both companies.
It allows IBM to gracefully exit an increasingly commoditized market, repays its significant investments in xbased system development, extends and deepens its relationship with a long-trusted strategic partner, and allows it to concentrate its resources on long-term goals and market opportunities.
The deal offers Lenovo near-immediate entry into high-value business IT markets. The migration of System x executives, managers and workers to Lenovo should place it in good stead with existing and prospective customers, and contribute substantially to its future success.
In fact, if Lenovo can achieve with IBM's System x solutions what it has accomplished with IBM's PC assets, the result could be a significant reordering of the businesses and expectations associated with Industry Standard xbased servers and solutions.
E-Commerce Times columnist Charles King is principal analyst for Pund-ITan IT industry consultancy that emphasizes understanding technology and product evolution, and interpreting the effects these changes will have on business customers and the greater IT marketplace. Though Pund-IT provides consulting and other services to technology vendors, the opinions expressed in this commentary are King's alone.Jan 23, · Giving up a years-long fight for profits in a highly competitive part of the market for powerful networked machines, IBM has agreed to sell its x86 server business to Lenovo for $ billion, the.
The move echoed IBM’s decision to sell its iconic personal computer business to Lenovo nearly a decade ago. at about the same rate it did in when Lenovo bought the PC business from IBM.
IBM finally sold its PC division to Lenovo, because IBM had approached Lenovo few years back from to sell their PC division. But Lenovo had rejected stating the poor shape of PC division of IBM as the main reason for not buying out IBM%(2).
Any deal by IBM to sell parts of its server business to Lenovo is likely to focus on low-end commodity x86 hardware, not higher-end x86 systems such as IBM's PureSystems and iDataPlex servers, an.
It was a regrettable and bad move from IBM to sell its PC division to Lenovo. Lenovo machines are getting more “cost-effective” each year (read: less and less . Lenovo is digesting its acquisition of IBM's server business. On the mobile segment, it is building up Motorola's business.
Mobile and enterprise segments did well.