The Lenovo purchase of IBM’s low-end x86 server business closed about a month ago. Now that all the smoke has cleared, it’s time to examine a few of the angles about why the sale went down, what it delivers to both Lenovo and IBM, and how it affects current users of IBM-branded x86 equipment.
First, the easy question: Why the sale?
Think back to 2005 when Lenovo bought IBM’s PC business. Lenovo instantly became the third-largest PC supplier in the world and is now the largest (ahead of HP and Dell, based on unit sales). The ThinkPad that Lenovo bought from IBM is the most successful and most durable everyman’s laptop in the word, and it continues to endure with top and near-top worldwide marketshares.
Lenovo wants to replicate that success with its purchase of IBM’s everyman server technology. And when the deal closed, and Lenovo finally became the owner of IBM’s profitable x86 server business, Lenovo immediately went from 6th to 3rd in marketshare in the x86 market (behind, yep, HP and Dell).
Sure, the x86 stuff is pretty unsexy. It’s a commodity. Sort of like Lego blocks. But the historic low cost of the product means that x86 stuff is still a major core infrastructure component for red-hot market segments like big data and cloud deployments. And remember that Lenovo will also acquire Motorola Mobility – the smartphone business that Google bought from Motorola in 2011 – by the end of the year. Mobile data’s one of the main drivers of the growth in large-scale commodity-server deployment. So it’s a proper marriage for Lenovo.
For reference, here’s the formal list of the x86 product that Lenovo bought from IBM:
- System x racks and towers
- x86 BladeCenter
- x86 Flex System blade servers and integrated systems
- Associated software, switching and maintenance operations
What does the sale deliver to both companies? For IBM, it allows Big Blue to continue to divest itself of commodity-hardware manufacturing and to continue its trend of crafting strategic partnerships with hardware manufacturers. Lenovo’s a big partner, but don’t forget IBM’s historic alliance with Apple, announced in July. There’s a different type of hardware integration happening right now, where workplace functionality and process is no longer desktop-specific. IBM has a lot to gain by selling a solid hardware business like the x86 line to Lenovo, because Lenovo can deliver legendary efficiency and scalability to gain more share for the servers and thus benefit IBM process software and platforms far into the future.
Does anybody really think IBM should still be making and selling PCs? Ask that same question about low-grade servers 2 years from now.
But the question looms: Where does all this leave current IBM x86 customers? Not much should change, according to both Lenovo and IBM. Former IBM server chief Adalio Sanchez – who led the x86 server business at IBM – is now senior vice-president of enterprise systems, reporting to Gerry Smith, Lenovo’s president for the North America region.
There’s talk that the entire x86 business might suddenly be more approachable – both from an IBM and Lenovo standpoint. There’s also speculation, likely grounded in truths, that strong incentives will emerge to align Lenovo PC users with x86 servers. That’s a bit of good news for firms and customers who want incentives to scale and align at the same time.