Lenovo buys part of IBM server business for USD 2.3 billion

The Chinese company said it expects to offer jobs to 7,500 IBM employees as part of acquisition of IBM's x86 server business.

PHOTO: Reuters PHOTO: Reuters
Lenovo Group is buying part of IBM's server business for $2.3 billion, adding to a product line-up dominated by personal computers and smartphones.

The Chinese company on Thursday said it expects to offer jobs to 7,500 IBM employees in locations around the world as part of its acquisition of IBM's x86 server business.

Lenovo and IBM have collaborated for a number of years.

The Chinese company entered the global personal computer market in 2005 by acquiring IBM's PC unit. It has since expanded into wireless products including smartphones and tablets.

The latest purchase allows Lenovo to expand its range of products and reduce reliance on sales of PCs, a market that is weakening as customers shift rapidly to smartphones and other wireless devices.

"We are confident that we can grow this business successfully for the long-term, just as we have done with our worldwide PC business," said Yang Yuanqing, Lenovo's chairman and CEO, in a statement.

Lenovo was declared the No. 1 personal computer maker in the third quarter of last year by research firms Gartner and IDC, surpassing rival Hewlett Packard Co. That was tempered, however, by the steady erosion of worldwide PC demand.

Lenovo, which is based in Beijing and in Research Triangle Park, North Carolina, has said it expects mobile devices to become the bulk of its business in coming years.

IBM, based in Armonk, New York, will continue to develop Windows and Linux software for the x86 platform and will provide service to customers for an extended period after the acquisition, Lenovo said.

The two companies also plan to enter into a strategic relationship. It will include a reseller agreement for IBM's Storwize disk storage systems, tape storage systems, and certain cloud, file system, platform computing and system software products.

The acquisition announced Thursday covers IBM's System x, 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, Lenovo said.

IBM will retain its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances.

In its latest financial report, Lenovo said profit rose 36 per cent from a year earlier to $220 million in the three months ending September 30. Sales rose 13 per cent to $9.8 billion.

(Associated Press)