Long Out of PCs, Big Blue Relooks at Jettisoning Low-end Servers

Rumors abounded last year that IBM was fixing to sell off its low-end server line much like it sold the PC business to Lenovo -- which is making a killing selling what it got from Big Blue.

Now comes word that the low-end IBM line is once again on the block, maybe even to Dell of all people.

This isn’t such a bad thing for the boy from Armonk. Low-end servers are almost purely a commodity play, and IBM is all about services and value add. That’s why it should and will hang onto to its higher-end proprietary products, such as mainframes and the System p.

Lenovo almost nabbed the IBM line last spring, but the deal fell through. Like Dell, Lenovo already sells servers and an IBM deal would only augment that business. Reports had it that Lenovo was willing to pay nearly $2.5 billion, not nearly enough for the Big Blue bean counters.

Estimates have it that IBM rakes in close to $5 billion a year on commodity x86 boxes, so Lenovo’s $2.5 billion offer wasn’t even a multiple of revenue, indicating this is a low-growth business.

The Real Deal Servers

IBM’s higher-end servers are not just proprietary, but can be buttressed with proprietary management, virtualization and storage tools.

And here virtualization is perhaps the main technology, not just simplifying the data center; but also driving IBM’s “green computing” mission and its overall data center rationalization strategy.

The higher-end servers are also better candidates for IBM Global Services, which helps companies migrate legacy server infrastructures to IBM offerings.

So just what does IBM’s server line consist of today?

• System x. x86-based rackmount servers.
• BladeCenter servers. Also based on the x86 architecture.
• System p. High-end, Power-based servers that run Unix and Linux.
• System i. These are also based on the Power processor and use PowerVM. System i are mid-range servers that replace the AS/400 and the older System/36 and System/38. System i also supports VMware.
• System z. Known for years as mainframes, these may be the ultimate way to host VMs, as many as 1,500 VMs per machine.

On the commodity server front, which includes System x and BladeCenter, IBM sells third-party hypervisors from VMware Inc., Microsoft and Citrix Systems Inc. (XenServer) rather than the proprietary hypervisors that mark the higher-end lines.