Lenovo have just announced this week, that they have agreed to buy IBM’s x86 server hardware business and the related maintenance services for $2.3 billion. Lenovo will pay $2.07 billion in cash for the IBM business unit, topping this up with shares. The deal will encompass IBM’s System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and software, blade networking and maintenance operations. IBM will not walk away empty handed, as they will retain the System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances.
Although it is ranked as the world’s largest PC vendor, Lenovo has seen demand for PCs fall over the last few years and have begun to diversify by developing smartphones, tablets and smart TVs in order to maintain consistent revenue. This move to acquire IBM’s low-end server business will give Lenovo a new grip in the enterprise hardware market, putting them in line with rival competitors, Dell and Hewlett-Packard. In 2012, the company partnered with EMC to sell servers and storage, but Lenovo has struggled to gain a ground in the international server market, said Rajnish Arora, an analyst with research firm IDC.
Unlike its competitors, Lenovo has yet to establish strong ties with software makers such as Microsoft and Oracle to create a structure around its servers. HP, IBM and Dell currently lead the market, accounting for over two-thirds of all server sales. ”The server business is not just about producing hardware at the lowest price point and selling it…You need to have a very robust ecosystem of solutions and partners that you can work with to drive the business.” Arora said.
To compete with their rivals, Lenovo will have do a great deal more than just sell hardware, instead building solutions modified for its enterprise customers. ”As long as they can think differently, I think they will become formidable competition in the server space,” Arora said. If the deal finalises as planned, Lenovo’s acquisition will be the second time its bought a hardware business from IBM. Back in 2005, the company purchased IBM’s ThinkPad division, which assisted Lenovo to develop in the Business market.
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