Could Dell-EMC Deal Push Lenovo To Acquire IBM's Storage Business?

Being acquired by Dell in the $67 billion deal revealed Monday would likely dissolve EMC's reselling agreement with Lenovo, analysts say, and force the PC giant to find new paths into the data center market, perhaps by partnering more closely with IBM or acquiring IBM's storage business.

In a brief report published Tuesday evening, analysts at TBR Inc. say the blockbuster merger will end EMC's joint venture with Lenovo, making it important for the PC giant to "work even more quickly to partner with others, acquire, or build its own storage practice."

This could take a few forms, according to Krista Macomber, a TBR data center analyst. Macomber told CRN Lenovo could expand its storage reseller relationship with IBM, and could acquire IBM's storage business.

[Related: Michael Dell On EMC Deal: Together We'll Be 'Even More Powerful']

Those moves, Macomber said, would expand Lenovo's footprint in North America and improve its competitive stance against a combined Dell-EMC.

Those moves would also be a return to the well for Lenovo, which acquired IBM's PC business in 2004, and its x86 server business 10 years later.

IBM declined to comment for this story.

Currently, Lenovo resells and OEMs a number of EMC storage solutions in North America and in China, where the solutions have had more traction in the market, Macomber said. The company launched its own Lenovo-developed storage arrays last May.

In a statement to CRN, a Lenovo spokesperson said Lenovo's reseller agreement with EMC is, in fact, in question.

"We prefer not to speculate on what this acquisition means to our business relationship going forward, though it is likely to change," the spokesperson wrote. "Lenovo remains committed to delivering high-performance storage solutions for our customers in China."

One Northeast solution provider and Lenovo partner who did not want to be named told CRN he's not concerned about Lenovo's EMC relationship because the products in that portfolio haven't been in high demand among his customers.

Lenovo has been vocal about its strategy to gain market share by beating competitors on price. Now, according to the TBR report, it will need to come up with an "immediate competitive response" to the blockbuster merger in order to overcome the strategic challenges the deal creates for the development of its data center business.

"Lenovo is working aggressively to gain data center market share, but faces a strategic challenge in the form of its limited in-house competencies around storage, networking, and outcomes-focused LOB selling models," the TBR analysts wrote. "Lenovo is steadily filling out hardware portfolio gaps, … but work remains to be able to compete organically against an end-to-end Dell and EMC stack."

PUBLISHED OCT. 14, 2015