Lenovo Buying IBM's x86 Server Biz Would Be Good for Both - Page 2

Forrester's Fichera said IBM may be looking to get out of the low-end x86 server space in anticipation of continue margin declines. That area of the server market is getting increasingly crowded. Not only does IBM have to compete with HP and Dell, but also now with the likes of Cisco Systems and Lenovo, as well as original design manufacturers and Web 2.0 companies, such as Google, that will make their own servers to meet their individual performance and power needs.

The growth of Web 2.0 companies—including Google, Microsoft, Amazon and Facebook—and such trends as cloud computing and mobility are driving demand for servers that are high-performing, highly energy-efficient and low-cost.

Lenovo has been looking to grow its server business, and last year unveiled a number of low-end ThinkServer systems. Also last year, the company entered into a deal with storage giant EMC to develop new x86 server products, displacing Dell as EMC's partner. The two companies officially launched LenovoEMC in January.

Buying IBM's x86 server business would greatly expand Lenovo's customer base. According to Fichera, it also would expand Lenovo's server reach into markets like North America and Europe, something rival Chinese vendor Huawei Technologies has been unable to do.

According to an April 18 report by CRN quoting multiple unnamed sources, IBM is looking to sell its x86 blade, rack and tower systems to a vendor that wouldn't compete with it in other areas of its business, and that Lenovo—which doesn't have storage or networking businesses—is the only company in negotiations.