Lenovo To Buy IBM's x86 Server Business For $2.3 Billion


Lenovo will acquire IBM's x86 server business for approximately $2.3 billion under a deal the two companies announced Thursday.

The definitive agreement negotiated between the two companies covers IBM's 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 includes $2 billion in cash with the balance in Lenovo stock. The deal is subject to regulatory approvals and other closing conditions.

[Related: How We Got Here: Lenovo's Blockbuster IBM Server Deal]

Earlier this week IBM, reporting its fiscal fourth quarter financial results, said that sales of its System x servers had declined 16 percent year-over-year.

Lenovo and IBM also announced a strategic relationship which will include a global OEM and reseller agreement for sales of IBM’s entry and midrange Storwize disk storage systems, tape storage systems, General Parallel File System software, SmartCloud Entry offering, and elements of IBM’s system software portfolio, including Systems Director and Platform Computing solutions, the companies said.

IBM also said that it would continue to develop its Windows and Linux software portfolio for the x86 platform.

Following the close of the transaction, Lenovo will assume related customer service and maintenance operations. IBM will continue to provide maintenance delivery on Lenovo’s behalf for an extended period of time, so customers should see little change in their maintenance support.

Approximately 7,500 IBM employees around the world, including those based at major locations such as Raleigh, Shanghai, Shenzhen and Taipei, are expected to be offered employment by Lenovo, the companies said.

"This acquisition demonstrates our willingness to invest in businesses that can help fuel profitable growth and extend our PC Plus strategy," said Yang Yuanqing, chairman and CEO, Lenovo, in a statement. "With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, we are confident that we can grow this business successfully for the long-term, just as we have done with our worldwide PC business."

"This divestiture allows IBM to focus on system and software innovations that bring new kinds of value to strategic areas of our business, such as cognitive computing, Big Data and cloud," said Steve Mills, Senior Vice President and Group Executive, IBM Software and Systems, in the statement. "IBM has a proven record of innovation and transformation, which has enabled us to create solutions that are highly valued by our clients."

IBM said it would retain its System z mainframes, Power Systems, storage systems, Power-based Flex servers, and PureApplication and PureData appliances.

IBM and Lenovo have been in talks since early last year for Lenovo to acquire IBM's struggling x86 server business. CRN first reported the negotiations in April.

Lenovo acquired IBM's PC business in 2005.

More recently there reports that both Lenovo and Dell were negotiating with IBM to acquire the x86 business.

PUBLISHED JAN. 23, 2014