Lenovo buys part of IBM server business for $2.3B

Published on NewsOK Modified: January 23, 2014 at 2:56 pm •  Published: January 23, 2014
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BEIJING (AP) — China's Lenovo Group is buying IBM's low-end server business for $2.3 billion, expanding a product line-up dominated by PCs, tablets and smartphones.

Lenovo, the world's biggest personal computer maker, said Thursday that it expects to offer jobs to 7,500 IBM employees as part of its acquisition of the so-called x86 server business.

IBM will continue to make mainframe computers, high-end servers and storage systems.

The acquisition will accelerate Lenovo's expansion beyond its traditional PC business, said Peter Hortensius, a senior vice president.

"We see a transformation coming for our company from just being a PC company to being a mobile device, PC and enterprise server company," said Hortensius in a phone interview. "This provides another strong leg for that strategy."

Lenovo has its own server business but Hortensius said it is less than one-fifth the size of the IBM Corp. unit. He said the acquisition will move Lenovo ahead five years in its plan to expand in servers, raising its global ranking among suppliers from No. 6 to No. 3 and increasing its share of global server sales from 2 percent to 14 percent.

"This divestiture allows IBM to focus on system and software innovations that bring new kinds of value to strategic areas of our business," Steve Mills, IBM's senior vice president and group executive for software and systems, said in a statement.

IBM is in the midst of shifting its focus away from hardware toward software and services. The company recently announced a $1.2 billion investment in its cloud computing business and a $1 billion investment in its Watson cognitive computing operations.

Lenovo passed rival Hewlett Packard Co. as the No. 1 PC maker in the third quarter of last year, a triumph tempered by eroding demand. The company has said it expects mobile devices to become the bulk of its business in coming years.

Lenovo, based in Beijing and in Research Triangle Park, North Carolina, has collaborated with IBM for a number of years. The Chinese company acquired IBM's PC unit in 2005 and has since expanded into wireless products including smartphones and tablets.



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