Chinese Multinational Technology Company Lenovo to Buy IBM's x86 Server Division
January 24, 2014
Chinese multinational technology company Lenovo - recognized as the world's largest producer of personal computers - will buy IBM's "low-end" x86 server division, which includes IBM's System x and iDataPlex servers. The purchase will cost Lenovo $2.3 billion and the move is seen as an extension of a business arrangement that saw the company purchase IBM's “ThinkPad” brand of personal computers in 2005. News of the purchase move saw Lenovo's shares increase 1.2% on the Hong Kong Stock Exchange.
The deal will require Lenovo to make an initial cash payment of $2 billion and subsequent payments of $300 million in stock. IBM has agreed to maintain development of Windows and Linux-based software for the x86 server division while Lenovo will be responsible for customer service and maintenance. IBM’s System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances are not part of the deal. Lenovo is likely to absorb the 7,500 IBM employees that work in the business areas the company has purchased.
The deal will enable to IBM to concentrate on its key strategic areas, which include the Watson Group. As the corporation’s Senior Vice President and Group Executive, IBM Software and Systems Steve Mills explained, "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 has a proven record of innovation and transformation, which has enabled us to create solutions that are highly valued by our clients."