China’s Lenovo to acquire US IBM’s x86 server biz to take on Dell, HP
25 Jan 2014 4:50 AM IST
IBM will receive $2.07 billion in cash and the rest in shares for the x86 business, Lenovo said, in a deal seen as helping the Chinese firm diversify away from the slumping PC-sales sector.
IBM will still provide maintenance on behalf of Lenovo, while some 7,500 members of staff worldwide will be offered employment by the Chinese company, according to Dow Jones Newswires.
The deal, announced in a statement to the Hong Kong Stock Exchange, comes after Lenovo bought the US firm's PC business for $1.75 billion in 2005, in a landmark deal that showcased Chinese companies' efforts to go overseas.
It will also allow Lenovo to compete in the server segment with Dell and Hewlett-Packard as it looks to diversify away from the personal computer market, which has seen sales slump in recent years.
Today's (Thursday) announcement comes after Lenovo and IBM resumed talks on a buy-out of the US firm's low-end server business that had broken down last year over differences in price.
‘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,’ IBM Software and Systems Senior Vice President and Group Executive Steve Mills said. Revenue from its hardware business, including servers, have been falling as more companies switch to the cloud from traditional infrastructure.
According to research firm Gartner, IBM is the world's second largest player after HP in the $12.3 billion server market with a 22.9 per cent share in the third quarter of 2013.
The move will significantly help Lenovo, which is yet to figure in the top five list. Lenovo and IBM also plan to enter into a strategic relationship, which will include a global OEM and reseller agreement for sales of IBM's entry and midrange Storwize disk storage systems and tape storage systems among others.
Following the closing 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.
IBM will still provide maintenance on behalf of Lenovo, while some 7,500 members of staff worldwide will be offered employment by the Chinese company, according to Dow Jones Newswires.
The deal, announced in a statement to the Hong Kong Stock Exchange, comes after Lenovo bought the US firm's PC business for $1.75 billion in 2005, in a landmark deal that showcased Chinese companies' efforts to go overseas.
It will also allow Lenovo to compete in the server segment with Dell and Hewlett-Packard as it looks to diversify away from the personal computer market, which has seen sales slump in recent years.
Today's (Thursday) announcement comes after Lenovo and IBM resumed talks on a buy-out of the US firm's low-end server business that had broken down last year over differences in price.
‘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,’ IBM Software and Systems Senior Vice President and Group Executive Steve Mills said. Revenue from its hardware business, including servers, have been falling as more companies switch to the cloud from traditional infrastructure.
According to research firm Gartner, IBM is the world's second largest player after HP in the $12.3 billion server market with a 22.9 per cent share in the third quarter of 2013.
The move will significantly help Lenovo, which is yet to figure in the top five list. Lenovo and IBM also plan to enter into a strategic relationship, which will include a global OEM and reseller agreement for sales of IBM's entry and midrange Storwize disk storage systems and tape storage systems among others.
Following the closing 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.
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