Lenovo to Buy IBM x86 Server Unit for $2.3 Billion

The deal will enable IBM to shed a low-margin hardware business while giving Lenovo an avenue into the data center.

Lenovo, which during the past nine years has leveraged its acquisition of IBM's PC business to become the world's top vendor in that market, is now buying Big Blue's low-end x86 server unit for $2.3 billion.

The two companies made the announcement Jan. 23, about eight months after talks on the server business broke off between IBM and Lenovo, reportedly over a disagreement about the valuation of IBM's division.

In this deal, Lenovo will get IBM's System x systems, as well as its 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. Meanwhile, IBM will continue to build out its Windows and Linux software offerings for the x86 server platform, and for a while will provide maintenance delivery on the systems. Lenovo will take over customer services and maintenance operations, the companies said.

About 7,500 IBM employees worldwide—including at such sites as Raleigh, N.C.; Shanghai and Shenzhen in China; and Taipei, Taiwan—will be offered employment by Lenovo.

Negotiations between the two companies were first reported last year, though the discussions ended in May 2013. Reports began circulating this month that Lenovo and IBM were again talking about a deal and that other vendors—in particular, Dell and Fujitsu—also were interested. Ultimately, Lenovo won out.

The deal comes as IBM officials continue to look to shed low-margin hardware businesses, opting instead to focus on such areas as cloud computing, analytics and software. IBM also is investing heavily in such businesses as its Smarter Planet. The company recently announced it will spend more than $1 billion on a new business group created around its Watson technology, and $1.2 billion to grow its cloud computing capabilities in 40 data centers around the world.

Over the past several years, IBM has exited such hardware spaces as PCs and printers, and the x86 server business falls into the commoditized category that officials have opted to ditch. The deal still leaves IBM with its System z mainframe unit, Power systems, storage offerings and PureApplication and PureData appliances.

"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," Steve Mills, senior vice president and group executive for IBM Software and Systems, said in a statement.