IBM Forms Server Joint Venture with Chinas Great Wall Computer

IBM will own 80 percent of the International Systems Technology Company, which will make servers for the Asia-Pacific region.

IBM has formed a joint venture with Great Wall Computer Shenzhen Co Ltd. to manufacture servers for the Asia-Pacific region, settling uncertainty over how last weeks sale of IBMs PC division would affect the areas server operations.

The new venture, International Systems Technology Company, will take over from a 10-year-old alliance between the two companies—called International Information Products (Shenzhen) Co Ltd.—and will use the same manufacturing premises.

IIPC, with a four-building factory based in the Futian Bonded Area of Shenzhen, was IBMs main manufacturing base for Intel-based hardware in the Asia-Pacific region, manufacturing laptops, desktops and servers. Its PC operations were included in the sale of IBMs PC division to Lenovo, but server manufacturing wasnt included. Uncertainty over the fate of IIPCs server business caused Great Walls shares to fall 10 percent on Thursday.

On Sunday, however, Great Wall and IBM formally announced the new venture, ISTC, which is designed to take up where IIPC left off. As was previously the case with IIPC, it will be 80 percent owned by IBM and 20 percent owned by Great Wall, IBM said. ISTC will take over the Shenzhen plants manufacture of xSeries and pSeries servers. It will initially be sharing the premises with the PC manufacturing lines controlled by Lenovo-owned IIPC, but will ultimately be separated off, said IBMs Tara Sexton, vice president of communications for Integrated Supply Chain, in a telephone interview.

/zimages/4/28571.gifClick here to read about IBM customers reaction to the Lenovo deal.

"This is about drawing a line in the sand, distinguishing whats PCs and whats servers," Sexton said. "The new joint venture will continue the production of servers, while IIPC will continue to handle PCs and laptops. Asia is a huge growth opportunity, so the capability to manufacture servers for that market is very important."

IBM and Lenovo characterized the new venture as a formality and said manufacturing would continue seamlessly through the transition period. "All parties involved here are committing to make this a smooth transition that will minimize any impacts to our customers and our employees," said IIPC general manager Jeff Gallinat, in a statement. "Both companies will have bright futures, and will offer challenging work environments and opportunities for people to grow."

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