IBM in talks with Lenovo over potential x86 server business saleBy Jose Vilches
Almost a decade after famously unloading its personal computer business to Lenovo, IBM is once again looking at the Chinese firm over a potential deal to sell off its System x server business. According to reports from The Wall Street Journal and CRN, the company is seeking between $5 billion and $6 billion for the business, which sells low-priced x86 servers traditionally used to power large corporate data centers.
News of a possible sale comes shortly after IBM announced disappointing earnings for the first quarter of 2013, with a one percent drop in profits and sales figures that missed forecasts by $1.3 billon. Total revenue for hardware systems declined 13% during the quarter, and while sales of mainframes rose 7%, System x server sales in particular dropped by 9 percent, dragging hardware profits down to a pretax loss of $405 million.
Lenovo -- along with Apple -- has been consistently one of the fastest-growing computer companies for several quarters at a time pretty much everyone else is seeing a dramatic decline in sales. The Chinese company has already surpassed Dell to take the number two position in PC market share, and is vying with Hewlett-Packard to become the world's biggest PC maker by shipment volume -- according to IDC they briefly took the crown during the third quarter of 2012 and it's just a matter of time before they leap past HP again.
While the company seems to be doing remarkable well in the consumer space, a move into the server business could help Lenovo compete against HP and Dell in the business market.
This morning they directly admitted to the negotiations -- although without mentioning IBM by name. In a clarification announcement to stockholders, Lenovo said it "is in preliminary negotiations with a third party in connection with a potential acquisition", adding that "no material terms concerning the Potential Acquisition have been agreed and the Company has not entered into any definitive agreement."