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Chinese computer maker Lenovo announced yesterday that it will acquire IBM's low-end x86 server unit for US$ 2.3 billion in cash and Lenovo stock shares.
The deal will also see about 7,500 current IBM employees in the United States and China transfer their employment to Lenovo. Lenovo's interest in IBM's x86 server business, which also includes IBM's System x, BladeCenter and Flex System servers, had been well known for nearly a year but the two sides could not agree on a price.
Sources say Lenovo originally offered US$ 2.5 billion but IBM wanted US$ 4 billion. Over the last several weeks, IBM started shopping the unit again but after some interests from Dell and Fujitsu, decided to sell to Lenovo.
This isn't the first time the two hardware giants have done business together. In 2005, Lenovo acquired IBM's ThinkPad personal computer (PC) business for US$ 1.75 billion which, at the time, was the largest international acquisition by a Chinese tech company. That sale helped catapult Lenovo into becoming the world's largest PC manufacturer. Similar to 2005, Lenovo's x86 server business acquisition is now considered China's largest technology deal and will make it one of the leading players in the server market and fortify itself against industry leaders Hewlett-Packard and Dell.
IBM on the other hand, has struggled in recent years with its low-end server units and by offloading the business, IBM is free to pursue more profitable interests such as systems and software innovations, Big Data solutions and cloud computing. Furthermore IBM still dominates the high-end server market, with some analysts saying that it holds a nearly 60% market share.
The deal still must pass a regulatory review by the Committee on Foreign Investment in the United States (CFIUS).
