Lenovo to acquire IBM's x86 server business for $2.3 bn

PC maker Lenovo will acquire the low-end server business of technology giant IBM for USD 2.3 billion, the biggest-ever tech acquisition by a Chinese company.
Lenovo and IBM have entered into a definitive agreement in which Lenovo plans to acquire IBM x86 server business for approximately USD 2.3 billion, of which two billion will be paid in cash and the balance in Lenovo stock, the companies said in a statement.
About 7,500 IBM employees around the world, including those based at major locations such as Raleigh, Shanghai, Shenzhen and Taipei, are expected to be offered employment by Lenovo.
In 2005, Lenovo had acquired IBM's PC business, including the ThinkPad line of PCs, for USD 1.75 billion. The purchase helped the the USD 34 billion group leapfrog to the top of global PC maker rankings.

"This acquisition demonstrates our willingness to invest in businesses that can help fuel profitable growth and extend our PC Plus strategy," Lenovo Chairman and CEO Yang Yuanqing said.
With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, Lenovo is confident of growing this business successfully for the long-term, just as the worldwide PC business, he added.

The current acquisition will help Lenovo diversify revenue away from the shrinking global PC business and propel growth from data storage servers.
Lenovo will acquire IBM's System x, BladeCenter and Flex System blade servers and switches, while IBM will retain System z mainframes, power systems, storage systems and power-based Flex servers.

The US-based firm will also continue to develop and evolve its Windows and Linux software portfolio for the x86 platform.
The agreement will help IBM move away from the low-margin x86 business (less powerful and slower servers) and instead focus on higher-margin offerings toward profitable software and services.