IBM looks to sell its x86 server business to Lenovo as profits crash

IBM logoIt has been nine years since IBM exited the personal computer business by selling its PC brands to the Lenovo Group. Now IBM apparently wants to get out of the "commodity" computing business altogether and is looking to Lenovo again.

The Wall Street Journal reports that IBM is in negotiations to sell its x86 architecture server business to Lenovo. Lenovo issued a "clarification statement" to stockholders this morning saying that the company "is in preliminary negotiations with a third party in connection with a potential acquisition. As at the date of this announcement, no material terms concerning the Potential Acquisition have been agreed and the Company has not entered into any definitive agreement in relation to the Potential Acquisition."

Lenovo is registered in Hong Kong and has a headquarters in North Carolina not far from IBM's Durham campus. It has already surpassed Dell to take the number two position in PC market share behind Hewlett-Packard, and a move into the server business could help Lenovo compete more broadly against HP and Dell in the business market.

IBM, for its part, would unload a business that has been a drag on its profits. On April 18, IBM reported a one percent drop in profits and quarterly sales figures that missed forecasts by $1.3 billon. IBM's System x server sales dropped by 9 percent, dragging hardware profits down to a $405 million loss before taxes, while its mainframe sales had increased 7 percent.

IBM's troubles are indicative of bad news for the whole technology business, according to Deutsche Bank Securities Analyst Chris Whitmore. AllThingsD's Arik Hesseldahl reports that Whitmore wrote in a note to clients, “The IBM miss is a decidedly negative read through for the entire IT hardware segment and we are incrementally more cautious on the sector.”

Source: Ars Technica

Tags: IBM, Lenovo, servers

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