In what is largely considered a win-win deal, Chinese multinational PC company Lenovo is acquiring IBM´s giant low-end server business, which includes its x86 servers. Lenovo announced Thursday its agreement to buy IBM’s server unit for $2.3 billion in cash and stock.
In 2005, Lenovo purchased IBM’s ThinkPad personal computer unit for $1.75 billion, an acquisition that helped Lenovo become the world´s largest PC maker, overtaking Dell and HP. This week´s transaction will make the Beijing-based company competitive with Dell and HP in the server market. IBM had a 22.9% share of the global server market in 2013, the second largest in the world; according to the research firm Gartner. HP had the biggest share in the market, while Lenovo did not make the top five.
Regarding the Chinese company’s intentions in the server industry, Lenovo CEO Yang Yuanqing stated: “With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, we are confident that we can grow this business successfully for the long-term, just as we have done with our worldwide PC business.”
The research firm Dealogic reported that the deal would be the largest foreign technology acquisition by a Chinese company. Derek Scissors, a researcher at the American Enterprise Institute, said that China invested $14 billion in the US market in 2013, with the Chinese directing more investment toward the US than any other country during the last decade.
In a statement, IBM software and systems vice president Steven A. Mills said: “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.” The sale is consistent with IBM’s general move away from hardware to focus more on software and tech services.
The Committee on Foreign Investment in the United States (CFIUS) will almost certainly scrutinize the deal carefully. In 2012, according to a recently released CFIUS report, Chinese companies faced the most challenges in getting their US acquisitions cleared. Lenovo, however, is a familiar company in the US, and is viewed as posing little national security risk.