Lenovo is set to become the third-largest player in the $42.1 billion global x86 server market after finalizing deal with IBM on owning a multibillion-dollar portion of x86 server business will own it from Oct. 1.With the addition of IBM’s x86 server business and the 7,500 former IBM-ers joining Lenovo, channel partners should brace for change as this is going to open additional revenue opportunities for Lenono’s partners.
Earlier, it was reported that talks between IBM and Lenovo have broken down over valuation concerns, but said it’s possible the two companies could resume negotiations.W
|hile the acquisition allows IBM to exit from a bruising server battle with HP and Dell and focus on products and services that have higher margins. The acquisition puts Lenovo on the path to ultimately unseat HP and Dell as leading server makers.
After the long await, Lenovo is acquiring 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, PureApplication and PureData appliances.
“With the close of the x86 acquisition, Lenovo will add a world-class business that extends our capabilities in enterprise hardware and services, immediately making us a strong number three in the global server MARKET
,” said Yang Yuanqing, Chairman and CEO of Lenovo.
The agreement builds upon a strong history of collaboration that began in 2005 when Lenovo acquired IBM’s PC business, including the ThinkPad line of PCs. Lenovo’s pending acquisition of Motorola Mobility from Google will make it the world’s third-largest smartphone maker, while further strengthening its position as a top-three maker of smart connected devices – PCs, tablets and smartphones.
Amar Babu, Managing Director, Lenovo India said, “India has always been a critical MARKETfor Lenovo. Since we acquired IBM’s PC business, our India growth has evolved significantly and we hope to repeat the same success with the x86 acquisition. The addition of x86 servers will play a key role in driving innovation in our PC business and in turn, Lenovo’s scale, efficiency and channel reach capabilities will further strengthen the x86 server business.“
As described in the January announcement of Lenovo’s acquisition of IBM’s x86 server business, Lenovo and IBM have also established a strategic alliance where Lenovo will serve as an Original Equipment Manufacturer (OEM) to IBM and resell selected products from IBM’s industry-leading storage and software portfolio, including IBM’s entry and midrange Storwize storage product family, Linear Tape Open (LTO) products, IBM Flash storage arrays and elements of IBM’s system software portfolio, including Smart Cloud, General Parallel File System and Platform Computing solutions. This strategic alliance means Lenovo can now offer these products as part of a more comprehensive enterprise IT solution, allowing it to support a greater range of customer needs in data centers.
Lenovo is buying IBM’s x86 server business intact and is committed to following the IBM x86 product roadmap, including Flex and x86-based PureFlex integrated systems. Lenovo will continue to drive innovation in these products. As previously disclosed, upon close, IBM will continue to provide maintenance delivery on Lenovo’s behalf for an extended period of time, so customers will experience a seamless transition with no change in their maintenance support.
The global team of the IBM x86 server business will be organized under Lenovo’s Enterprise Business Group. Adalio Sanchez led the x86 server business at IBM and will continue in this capacity at Lenovo, as senior vice president of Enterprise Systems, reporting to Gerry Smith, Executive Vice President of Lenovo Group and President of Enterprise Business Group and Americas Group.
The purchase price is approximately US$ 2.1 billion. Approximately US$ 1.8 billion will be paid in cash at closing after estimated adjustments and approximately US$ 280 million will be paid in Lenovo STOCK, based on the closing price of Lenovo’s stock on September 26, 2014. The transaction satisfied regulatory requirements and conditions, including clearance by the Committee on Foreign INVESTMENT in the United States (CFIUS), the European Commission and the Chinese Ministry of Commerce.
The transition will begin Wednesday in countries that are part of the initial closing, which includes most major MARKETS. The transaction is expected to close in most other countries later this year, with the few remaining countries following in early 2015.
