IBM offloading server business to Lenovo for $2.3 billion

Lenovo has announced plans to acquire IBM's low-end server business in a deal worth $2.3 billion, giving it another chunk of IBM's hardware business.

In 2005, Lenovo purchased IBM's consumer PC division which made the ThinkPad and ThinkCentre line of computers and phased out the IBM brand in 2007. Now, the latest acquisition announced by Lenovo will give the company control over System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers along with the related softwares and maintenance contracts. Lenovo is expected to pay up to $2 billion in cash and the remaining amount in equivalent number of stocks. 7500 employees associated with the unit from all over the world will be offered to join Lenovo as part of the agreement.

Following the latest acquisition, IBM will be left with a hardware business consisting of System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances. IBM will remain involved in developing Windows and Linux based software solutions for the x86-based servers.

Lenovo can bring growth to IBM's server division in China where it has not been successful until now. Yang Yuanqing, chairman and CEO of Lenovo said that, “This acquisition demonstrates our willingness to invest in businesses that can help fuel profitable growth and extend our PC Plus strategy.”

While the deal is subject to local clearance from various countries, both the parties expect that the deal will not affect their respective consumers.

Source: Lenovo Newsroom | Image via Lenovo

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22 Comments

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wotsit said,
So what do IBM actually do?

Get rid of their manufacturing business, make all their staff redundant, and give Ginni big bonus and share allocations! Look up "Roadkill 2015"

Lenovo pretty much ruined ThinkPads... we use to buy them exclusively, but we've had nothing but problems in the latest revisions...

neufuse said,
Lenovo pretty much ruined ThinkPads... we use to buy them exclusively, but we've had nothing but problems in the latest revisions...

Like what? I'm genuinely curious because from everything I've seen ThinkPads are still head and shoulders above all other laptop hardware on the market.

I'm not sure what problems you are having since I don't have one of the newest models but I think I would still take a Thinkpad over any of the pile of junk laptops that HP and Dell shovel out.

Lenovo has been the #1 PC maker and very successful with their mobile laptops and now they are going to be tested in the business server and see if they are going to be successful as well.

The current server offerings are top notch and Lenovo has been making some nice PCs and Windows 8 Tablets, but it'll be tough for them for sure.

I've had nothing but bad luck with Lenovo. Their ThinkCentre line used to be incredible up until about 6 months ago. Now I'd be hard pressed to find a shipment of computers from them that don't have 3-4 DOA machines. I've switched over to hp for my new machines... but I've still been ordering IBM servers. I think from now on I'll be moving over to hp for those too.

This is probably due to china, russia and brazil ditching ibm due to nsa ties. IBM saw a huge drop in sales to these countries after snowden's revelations.

No it's not. This has been planned for a while. They tried to make it happen last year. IBM just has no interest in building hardware anymore aside from it's babies, p and z systems.

Edited by AJerman, Jan 24 2014, 3:14pm :

Exactly - IBM started the transition (to a services company) after the sale of the PC business to Lenovo - which ALSO got right of first refusal on any other parts of IBM. (Lenovo turned down the offer of IBM Global Storage - which was instead acquired by Hitachi.)

AJerman said,
IBM just has no interest in building hardware anymore aside from it's babies, p and z systems.

Actually hardware IS IBM, that's what the "M" in their name is all about. The problem with IBM today, is beancounters are running it. They are only interested in "high margin" products. Like many others before them this will be their downfall. We see retailers today ditching "low margin" products because their beancounters tell them they should only sell high margin products. Unfortunately the low margin business usually makes up 90% of their sales, so when they stop selling them, their income is only 10% of what it was, but hey, they are making 100% profit on what they do sell!. Sure way to go out of business.

Gungel said,
Good luck getting clearance from the U.S. government.

My work (U.S. Defense Contractor) used to use ThinkPads exclusively until Lenovo bought them then it came down that under no circumstances were we to buy them since they are partially owned by the Chinese Government. As long as the Chinese Academy of Sciences owns any part of them I imagine this will remain the case and at this point even if they sold their stake there would be a stigma attached for some time. We went from ThinkPads to Dell Laptops and recently switched to HP. I imagine all our IBM Servers will be phased now as well as they reach end of life and replaced by Dell or HP servers. End of a era now with IBM out of the x86 business entirely.

Just cause Chinese government owns part of Lenovo? What a hypocrite and idiotic reason.

We should start boycotting this big US of A with the rest of the world with their hypocrite idiotic cavemen vision and idea's.

Intel and IBM probably put backdoors in that only the top of the US government knows about, and huwaei and lenovo also probably do the same with only things the chinese government knows about.

Shadowzz said,
Just cause Chinese government owns part of Lenovo? What a hypocrite and idiotic reason.

We should start boycotting this big US of A with the rest of the world with their hypocrite idiotic cavemen vision and idea's.


I can certainly understand someone thinking the decision is idiotic, that's a matter of opinion after all but I don't see how it's hypocritical. The U.S. Government doesn't own part of any computer company that I'm aware of. They don't typically take ownership in any companies, though the recent General Motor bailout was an exception. I believe they sold the last of their GM Stock on Dec. 9th though (at about a $10 billion loss to U.S. taxpayers) so that little exception has concluded. If the U.S. wishes to support a company it does so buy giving it business (preferential treatment on contracts, etc.), by giving it grants (especially for research), or by giving it low interest loans, (grants and special deal loans typically have strings attached but the company can decide if it's worth the strings or not).

As for it being idiotic again that's a matter of opinion but given how the NSA is spying on everyone they probably assume other countries are doing the same and just haven't been caught. Also it's not so uncommon here in the U.S. for example it's extremely rare to find police cars from non-U.S. manufacturers. Local governments tend to prefer U.S. made products over European or Asian competitors. It's not U.S. specific either as nationalism is pretty large in factions all over the world. Japan and China are notoriously difficult markets to break into if you are a U.S. company going multi-national.

Asmodai said,

My work (U.S. Defense Contractor) used to use ThinkPads exclusively until Lenovo bought them then it came down that under no circumstances were we to buy them since they are partially owned by the Chinese Government.

Small potatoes. IBM didn't want low margin x86 desktops or laptops, which was why their sales were low. As you said they sold small numbers to people who wanted to pay premium prices. Lenovo has taken the baton, and now is the largest PC maker in the world. They have turned an IBM failure into a massive success. I see no reason they will not do the same for x86 servers.