IBM sells x86 server business to Lenovo for $2.3bn

Long-rumoured deal marks IBM's exit from commodity, Intel-based server market after hardware sales slump

IBM is selling its x86 server business to Lenovo for $2.3bn.

The deal covers 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’s server business retains its System Z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances.

The deal has been rumoured for some time, and follows a significant drop in IBM’s hardware revenues. In the company’s fourth quarter results, announced earlier this week, hardware sales slumped by 26% year on year – although the x86 business declined only 16%, compared to Power Systems which fell 31% and mainframes sales down 37%.

Back in 2005, Lenovo also acquired IBM’s PC business, as the IT giant started a process of selling off its low-margin commoditised hardware ranges. About 7,500 IBM staff will move to Lenovo as part of the deal.

“This acquisition demonstrates our willingness to invest in businesses that can help fuel profitable growth and extend our PC Plus strategy,” said Yang Yuanqing, chairman and CEO, Lenovo.

“With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, we are confident that we can grow this business successfully for the long-term, just as we have done with our worldwide PC business.”

IBM is focusing heavily in new areas of business - it recently announced a $1.2bn investment in building cloud datacentres, and $1bn spend to grow sales for its Watson cognitive computing technology.

“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,” said Steve Mills, senior vice-president for IBM Software and Systems.

Read more on Server hardware