Lenovo has reached a long-awaited deal to buy IBM’s low-end server business after months of back and forth negotiations. According to a press release issued by the Chinese company this morning, the purchase price is approximately $2.3 billion, with $2.07 billion paid in cash and the rest in shares to be issued to IBM.
The move will see Lenovo taking control of IBM’s x86 server business comprising System x, BladeCenter and Flex System blade servers and switches, as well as x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking and maintenance operations.
IBM will retain some of its related assets -- System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances -- while around 7,500 of its staff across China, Taiwan, the US and other countries will be offered employment with the Chinese company.
The agreement builds upon a longstanding collaboration that began in 2005 when Lenovo acquired IBM’s PC business, which included the the ThinkPad brand and line of personal computers, for $1.75 billion. In the period since the companies have continued to collaborate in many areas. As part of the new deal, Lenovo will also become a global OEM and reseller for IBM's storage gear, covering IBM's Storwize disk systems, tape, General Parallel File System software, SmartCloud Entry offering, and elements of its system software portfolio.
The transaction is subject to the usual regulatory approvals in China and the US.
Talks between the two companies began almost a year ago but a deal did not materialize due to price disagreements. Lenovo valued the business at below $2.5 billion while IBM was seeking $5 - $6 billion. Recently, IBM revived its efforts to sell off its low-end server business to focus on higher margin endeavors. Dell and Fujitsu were reportedly interested as well but Lenovo ended up the winning bidder.
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