Dell and Lenovo In Talks to Buy x86 Server Business from IBM

IBM Again Looking Forward to Get Rid of Low-End Server Unit

by Anton Shilov
01/20/2014 | 11:55 PM

International Business Machines Corp. has reportedly re-started negotiations to sell its x86 server division. This time the company is in talks with Dell and Lenovo Group, which are both interested in taking over IBM’s business units to get new clients, product families, market share and technologies.

 

In mid-2013 it transpired that IBM was in advanced talks to sell its x86 server business unit to Lenovo Group. The exact terms of the deal were unclear, but it could easily worth from $2.5 billion to $6 billion of dollars as IBM is one of the technological leaders of the server market with a very strong reputation among its customers. However, the two companies halted negotiations over valuation concerns. According to Bloomberg news-agency, IBM and Lenovo recently re-started talks and may ink the deal shortly.

Dell, which recently became a private company with an aim to refocus from personal computers to enterprise products and services, is also interested in taking over IBM’s x86 server business along with technologies, customers, market share and technologies. According to Reuters news-agency, Dell is also negotiating with IBM.

It is hard to predict which of the two companies can win IBM’s server business. China-based Lenovo acquired PC business unit from IBM in 2005 and since then founded assembly lines in the USA to build PCs for government organizations. As a result, the U.S. authorities should approve the potential deal. At the same time, Round Rock, Texas-based Dell with loads of manufacturing capacities across the country is even more likely to receive approval from the government to buy IBM’s x86 server unit.

IBM has a history of aggressively shifting its business mix to areas with healthier progress and higher profit margins. While selling-off mainstream server business will boost IBM’s margins, it also means that the company will have to leave the server market in the coming years as the market of proprietary mainframes, where IBM is also very strong, is shrinking. Still, IBM may simply have no choice as with the rise of micro-servers, IBM would face major challenges from companies like Dell, HP and others.

IBM, Dell and Lenovo did not comment on the news-story.