Lenovo bought IBM’s (News - Alert) PC business nine years ago, and ever since has made a killing selling the technology IBM invented. Then last year Lenovo tried to do the same with IBM’s x86 server business, but its $2.5 billion bid came up short.
News broke earlier this week that the IBM low-end server business was back on the market, and that Dell (News - Alert) was in the running. Now comes more solid news that Lenovo still wants the IBM business, and the buyout could be done in a few weeks.
The value of the IBM asset is estimated at between $2.5 billion (Lenovo’s (News - Alert) original offer) to $4.5 billion. The annual revenues are round about $5 billion, so at the high end the value would be roughly that of revenues, with no multiple. This is indicative of a low growth commodity business.
Lenovo is confirming talks on an acquisition, but would not confirm that IBM’s server business is the target.
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?
On the commodity server front, which includes System x and BladeCenter, IBM sells third-party hypervisors from VMware Inc., Microsoft (News - Alert) and Citrix Systems Inc. (XenServer) rather than the proprietary hypervisors that mark the higher-end lines.