Sources: IBM-Lenovo Server Talks 'Moving Quickly'

IBM is reportedly seeking $5 billion to $6 billion for its x86 server business, an industry source who has been tracking the deal told CRN last week. Lenovo confirmed last week that it is in preliminary negotiations to buy a third-party server business but stopped short of identifying the technology vendor.

One source said Lenovo is acquiring IBM's low-end System x rack mount and tower systems but that IBM is keeping its PureFlex and BladeCenter servers.

[Related: IBM In Talks To Sell x86 Server Business To Lenovo ]

"I know for a fact all PureFlex and BladeCenters are secured and won't be moving [to Lenovo]," said the source, who requested anonymity because he is not authorized to speak on company matters.

An IBM spokesperson told CRN the company does not comment on rumors or speculation. A Lenovo spokesperson also declined to comment.

IBM employees, speaking on condition of anonymity, said big organizational changes are afoot that impact the full hardware portfolio. At least two IBM labs that support the full range of x86 servers have been notified that they will soon be part of Lenovo, sources said.

This week, support teams at IBM's "SuperLab" in Research Triangle Park, N.C., which develop server firmware and other utilities for IBM's x86 and other server lines, were informed that they'll be transferring to Lenovo, sources with knowledge of the matter told CRN.

Last week, sources told CRN that staff in IBM's product engineering (PE) lab at Research Triangle Park, which supports all of the vendor's server lines, had been informed that they'll be moving to Lenovo.

Though no official date for the changeover has been given, employees are expecting to be moved June 1, since IBM has previously announced major organizational moves on this date, sources told CRN.

IBM, which last week reported first-quarter earnings that disappointed Wall Street, has already begun shaking things up in its Systems and Technology Group by instituting a hiring freeze, sources said.

On Thursday, IBM replaced STG chief Rod Adkins with Tom Rosamilia, who was previously senior vice president of corporate strategy. Adkins will be taking over Rosamilia's old role.

IBM's server business was hit hard in the first quarter, with System x revenue dropping 9 percent and System p (IBM's Power servers) revenue plummeting 32 percent. IBM's storage revenue fell 11 percent during the quarter. Overall, IBM's STG revenue dropped 13 percent year-over-year.

CFO Mark Loughridge, during IBM's first-quarter earnings call, suggested that IBM will look to sell off underperforming businesses. "Here we're going to take substantial actions," he said without elaborating.

After IBM's earnings call, IBM President and CEO Ginni Rometty reportedly urged IBM employees to "step up" and move more quickly to new computing models to stay competitive, according to a report from the Wall Street Journal.

Joseph F. Kovar contributed to this report.

PUBLISHED APRIL 25, 2013