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Lenovo To Buy IBM's Server Business For $2.3 Billion
itwbennett writes "Well, that was fast. Earlier this week the rumor mill was getting revved up about a potential sale of IBM's x86 server business, with Lenovo, Dell, and Fujitsu reportedly all interested in scooping it up. On Thursday, Lenovo Group announced it has agreed to buy IBM's x86 server hardware business and related maintenance services for $2.3 billion. The deal encompasses 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. IBM will retain its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances." SlashBI has some words from an analyst about why Lenovo wants the x86 product line more than IBM does.
I remember thinking "too little, too late" when IBM launched its x86 line (the IBM 5150 PC with 8088 CPU) in 1981.
Damn, over 30 years later and we're still stuck with a variant of that architecture!
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So basically Lenovo got a server manufacturer for almost $1Billion less than Snapchat is worth.
Thank you Dave Raggett
I guess that IBM's customers can now stop worrying about the NSA planting bugs in their servers and worry about the Chinese government doing it instead :)
eh, greybeard here so maybe its the metamucil talking but IBM never stood much chance in the server realm. not that they didnt make a damn fine x86...most were quiet and powerful, but the market hat was looking toward IBM was too different and weird.
if you wanted a workstation for simple 2D cad stuff your clear alternative was dell. it was cheap, came with whatever copy of windows you wanted, and didnt bankrupt your small shop with overhead from licensing and support contracts....other than whatever autodesk was gouging you for.
a litle higher up the chain, if you were doing some composite rendering or computational fluid thermodynamics you had Sun microsystems. they made the bulletproof UNIX the grads from the local alma-mater recognized, and the hardware was dependable. sun servers chugged through the heavy arithmetic but the deskside SPARCstation was the sterling ally of the well-weathered fogie in the corner office who occasionally appeared for his 'laureate engineer' paperweight. the IT department appreciated suns no-nonsense RTFM mentality.
BIS, corporate informatics and number-crunchery that fed paychecks through the line printers and requisitions across the department heads was the golden child of IBM...heck, its in the name! BUSINESS machines! the AS400 ran cobol and from its cobwebbed confines were excreted every known model and function of how the money made the business and vice versa. "terminals" kept the cost of doing dirty work down and a few cloistered chosen were sequestered into office space to stitch new lovecraftian code whenever an earnings summary needed a tweak or a new way of visualizing things 'outside the box' needed rendering in code. AS400 turned into Z's and E's and I's and soon JDEdwards became Oracle and the new reality of deadlocked transactions and segfaulted Business Objects servers were a daily bain for the IT department but the song never changed. this was to become IBM. Because the reports were a touchstone of the business these machines lived to become behemoths and their triumphs accoladed from on high by watsons and oh so many marketeers that knew no boundaries in the iron they could sell. IBM was the Iron Business Marauder, the Intractable Bloat of the Management, the only way your applications would ever imply support for your way of doing business in the ERP EAP SAP clusterfuck that BIS and management had conceeded was somehow a necessity now. IBM could never hope to sell X86, because IBM sold complicity and approval in the licensing agreements for Oracle and enterprise, not hardware.
and while they toiled over the iron they sold, Dell and HP slowly absorbed the engineering fallout from SGI implosions and cheap commodity x86 incursion around a SUN that comparatively stood as a more expensive and only slightly quicker means of doing what the engineers had always done. Goosed a bit by linux, no doubt.
Good people go to bed earlier.
IIRC Lenovo is headquartered in the US and just opened another plant for PCs in the south. I don’t want to dismiss all of the concerns but let us try to put this in perspective.
But... but.. the PC is doomed! 3 months from now there will be nothing but tablets and cell phones!
A public consumer buying a laptop is one thing, but I can imagine certain blue chip institutions (banks for example) will be slightly less interested in buying servers from Lenovo as opposed to HP. I have some IBM servers on order right now and there isn't usually a lot in it when deciding whether HP or IBM is better for my use case. If it was Lenovo or HP, that decision would probably only go HPs way.
This really strikes me as something going very wrong in the tech industry, or perhaps where it intersects the financial industry. Any time you start seeing such offers it is generally a good sign that there is too much investment money and not enough good investments floating around... or some very dangerous group think is going on.
Look at it this way: the Chinese may feel rich enough to pay $2.3 billion for server business, but only Americans feel rich enough to pay $3.2 billion for a thermostat business. So, who has the bigger Nest egg?
Now Lenovo can fuck up that product line too, just like they did with the ThinkPad.
But doesn't that translate to "gaining market share in an overall shrinking market"?
If we're to believe recent stats, and increasingly tablets are outstripping sales of PCs, then in the short term Lenovo could continue to increase their share. But, if the market is correspondingly getting smaller.
This gets them into the server business, which presumably is a lot more resistant to stuff like tablets -- because, nobody is going to run their enterprise software on a tablet. :-P
Lost at C:>. Found at C.
A public consumer buying a laptop is one thing, but I can imagine certain blue chip institutions (banks for example) will be slightly less interested in buying servers from Lenovo as opposed to HP. I have some IBM servers on order right now and there isn't usually a lot in it when deciding whether HP or IBM is better for my use case. If it was Lenovo or HP, that decision would probably only go HPs way.
This was definitely my first thought--a lot of value is in the IBM mark. If Lenovo can't brand the hardware and services and IBM, they're going to lose a lot of business relative to the value of the sold hardware and related services business prior to purchase. I would think a bunch of people would continue to use them for legacy equipment or when they want new hardware to function especially smoothly with legacy equipment, but for a lot of institutional clients, I think you just wouldn't consider Lenovo.
I would think that when you're purchasing a solution to a tech issue for a major institution, you're looking for three things: (1) that the solution will work, (2) that the solution is something you can justify spending money on to your bosses, and (3) that the solution is something that will cover your ass at least somewhat if it fails (i.e. you can point to a major brand name the CEO will know and they are more likely to believe that it should have worked, but if you point to a brand without a reputation or that they feel at all sketchy about they will blame you for picking it).
Of course, YMMV
"No One Ever Got Fired for Buying IBM"
Except now, you can't buy any IBM hardware, right? So, how are you going to avoid getting fired?
If telephones are outlawed, then only outlaws will have telephones.
...don't welcome our new Chinese overloads. (Do you realize how hard it's going to be to learn to write/type Manderin?)
You already seem to be struggling with English.
It's not quite that bad, but unless something significant changes, I'm at the point where I buy a new PC or Laptop only when the previous one dies. And I'll only buy a new PC if the old one is unrepairable, or repairs cost more than a new one. The current computer I have is 8 years old, and still works fine for my uses. I have a newer laptop (3 years), but it was a $400 laptop, bottom of the line. Still does everything I need it to. The PC market is definitely different than 10-15 years ago when you need to buy a new machine every 2-3 years just to run the latest OS and Office software. There is nothing interesting about going out and buying a new computer, and there's very little reason to spend more than the minimum amount.
Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
I think you are too harsh on Lenovo.
I am using the Thinkpad X series and T series for the last 12 years...from the IBM days to the current iteration. I am yet to see a significant drop in quality on those two lines after Lenovo started rebranding. I am not sure about their entry models though.
Tat Tvam Asi
I don't know about that...Microsoft's offer of somewhere around $50B for Yahoo comes to mind.
Actually, the only thing dumber than that was Jerry Yang NOT taking the $50 billion...
The truth is that IBM's primary server market has never been its x86 offerings. The pSeries and System z market is much more lucrative what with engine licensing (CP, IFL etc) and massively expensive platform specific operating systems (z/OS, z/VSE, z/TPF, AIX etc) along with decades old products like CICS powering the vast majority of the financial world. I work closely with a contractor who worked for IBM for nearly four decades and his attitude to the distributed world is likely representative of a general antipathy to x86 on the server side within IBM (though I have no evidence other than him to back that up!) I suspect though, that the fact they can focus on "real" servers on the hardware side will probably be seen as good by most in Endicott.
I don't know about that...Microsoft's offer of somewhere around $50B for Yahoo comes to mind.
I agree it was a really really really dumb offer and even dumber to turn down but at least Yahoo has profits of about $1 billion/year. The valuation was stupidly high but at least you could base it on something. $3 billion for a company with zero revenues is beyond ridiculous and turning it down has to be one of the dumbest business decisions in the last 20 years.
Lenovo has "dual headquarters" in Beijing and Morrisville, North Carolina, but it is definitely a Chinese company - stock is traded in Hong Kong, the directors are Chinese, etc. That said, Lenovo isn't really a state-backed enterprise to the same degree as companies like Huawei; they probably don't receive much more government interference than, say, Apple or HP. Admittedly, that's not much comfort...
They still make a lot of software: http://www-01.ibm.com/software...
And I guess $1 billion of that sale will be used to finance their new $1 billion Watson division.
Schroedinger's Brexit: The UK is both in and out of the EU at the same time!
nothing nuts about it, profits too slim in x86 commodity server market. IBM can focus on consulting, high end enterprise softwares and big iron.