01/23/2014 - Update: Lenovo agrees to buy IBM's server business for $2.3 billion
By Michael Kan, IDG News Service
Lenovo Group has agreed to buy IBM's x86 server hardware business and related maintenance services for $2.3 billion, it announced Thursday.
The deal encompasses IBM's System x, BladeCenter, and Flex System blade servers and switches; x86-based Flex integrated systems; NeXtScale and iDataPlex servers and associated software; blade networking and maintenance operations. IBM will retain its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances.
Lenovo will pay $2.07 billion in cash for the IBM business unit, topping up its offer with shares.
Although it is ranked as the world's largest PC vendor, Lenovo has seen demand for PCs shrink and has begun diversifying, developing smartphones, tablets, and smart TVs to maintain revenue and earnings. Acquiring IBM's low-end server business will give Lenovo a new foothold in the enterprise hardware market, putting the Chinese PC maker in tighter competition with rivals Dell and Hewlett-Packard.
In its home market of China, Lenovo has also found some success in selling servers. In 2012, the company partnered with EMC to sell servers and storage there.
However, Lenovo has struggled to gain a footing in the international server market, said Rajnish Arora, an analyst with research firm IDC.
Unlike its competitors, Lenovo has yet to establish strong ties with software makers such as Microsoft, Oracle, or VMware to create an ecosystem around its servers, he said. Currently, HP, IBM, and Dell lead the market, together accounting for more than two-thirds of all server sales.Continue reading here
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