IBM and Lenovo are celebrating because the Committee on Foreign Investment in the United States (CFIUS) has put its stamp of approval on their x86 server deal. That means it’s cleared security hurdles.
Big Blue is selling that part of its business to Lenovo for $2.3 billion so it can focus on system and software innovations related to cognitive computing, big data, and cloud computing. By putting its x86 server business in Lenovo’s hands, IBM figures its customers still have a strong partner with which to move forward.
“The clearance by CFIUS of this transaction is good news for both IBM and Lenovo, and for our customers and employees,” IBM said in a statement. “The parties now look forward to closing the transaction.”
Enterprise Legitimacy for Lenovo
We turned to Charles King, principal analyst at Pund-IT, to get his thoughts on the pros and cons of moving forward with the deal. In addition to the $2.3 billion in cash, he told us the deal should allow IBM to fully leverage the considerable assets in its Power and System z portfolios -- and the unique qualities those platforms offer in the emerging analytics, cloud and cognitive computing markets.
“The deal also clearly benefits Lenovo, immediately vaulting the company into the third position" in the market for x86 servers, moving ahead "from its trailing place among the ‘others’ in most market tracking studies,” King said. “More importantly, in a single strike, Lenovo will gain a complete -class server portfolio, including midrange to high-end tower, rack mount and enterprise systems, past and new generation blades, high performance computing solutions, and integrated and converged systems.”
What’s more, he noted, Lenovo is acquiring the Enterprise-X technologies -- including the latest sixth-generation solutions -- that have helped make IBM a leading vendor in higher end systems, including in-memory solutions.
“In other words, much as the 2004 acquisition of IBM’s ThinkPad line helped make Lenovo a serious player in enterprise mobile computing, so should IBM’s System x organization help [Lenovo] gain near-immediate entry to some of world’s largest businesses,” King noted.
Overcoming Potential Pitfalls
All that said, are there potential pitfalls to the deal? Yes, King said. It could start with clashing corporate cultures. Still, King is optimistic since IBM and Lenovo have danced to this tune once before, with experience working hard to reduce employee culture shock and continuing to interface after the deal was done.
“The largest challenge may be how well Lenovo can adapt to becoming a major mover in enterprise data center solutions,” King said. “Former System x executives and employees will be carrying most of the weight in that respect, but it will also require the folks in Lenovo’s home office to adapt.”
Given their past ventures, King said success seems imminent. In fact, he noted, in the decade since it acquired IBM’s PC business, Lenovo moved from a distant third position to become the world’s leading PC vendor, a point that likely underscores some of the current fear-mongering among IBM and Lenovo’s competitors.
“Whether Lenovo can achieve similar progress and success in the server business that it achieved in PCs and laptops is anyone’s guess, but it would be a mistake to undervalue the human and technological assets the company will gain from this deal with IBM,” King concluded. Big Blue will soon be beyond System x, "but the future with Lenovo looks like blue skies ahead.”
Posted: 2014-08-24 @ 11:56pm PT
I think this is the End of IBM, the whole company will be sold in bits, its Board and CEO are too greedy always looking for quick perks.