After much speculation in the press (and following the announcement of IBM’s FY13 results yesterday), it has been confirmed that Lenovo is to acquire IBM's x86 server business. The agreement covers 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.
The purchase price is c$2.3bn - approximately $2bn of which will be paid in cash and the balance in Lenovo stock. The agreement of course follows the 2005 deal between the two firms, which saw Lenovo acquire IBM’s ThinkPad line of PCs. Lenovo is going to take on the customer service and maintenance operations, although IBM will continue to provide maintenance on Lenovo’s behalf during a transition process. The acquisition means around 7,500 IBMers around the world will be offered employment by Lenovo.
For IBM, this is absolutely a sound – and very expected – move. The divestiture brings in the cash to fuel investments (including acquisitions) in more strategically important areas. Q4 2013 results showed that revenue fell 5% to $27.7bn, with hardware sales falling faster than analyst expectations, at 25%. To counter the decline in traditional areas of its business, IBM is moving aggressively into higher growth areas such as data analytics and cloud (see IBM plans $1.2bn cloud investment and Salesforce and IBM: $4bn on cloud acquisitions in one day). IBM’s cash is helping it to continue its evolution in a market that continues to be very dynamic and fast-moving.