Lenovo on Monday announced that it will be closing the acquisition of International Business Machines Corp (IBM)’s low-end server unit this Wednesday.
The $2.1 billion acquisition deal, originally announced in January, will see Lenovo acquiring IBM’s x86 server catalogue, including 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 System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, PureApplication and PureData appliances within its control.
The final deal price is lower than the $2.3 billion announced earlier in January to reflect a change in the inventory valuation and deferred revenue liability, Lenovo said. Most of the $2.1 billion closing purchase price – $1.8 billion of it – will be paid in cash, with the remainder in stock.
The deal has already met the regulatory requirements and conditions, and has gained clearance from the Committee on Foreign Investment in the United States (CFIUS), the European Commission and the Chinese Ministry of Commerce.
Yang Yuanqing, chairman and CEO of Lenovo, said that the acquisition deal with IBM has opened a new “growth engine” for his company. He said that it is expected that the x86 unit will bring in $5 billion in its first year and deliver margins higher than the 4 percent of Lenovo’s PC business.
Yang said that Lenovo can now fully bank upon on IBM’s technology to compete with rival brands like HP and Dell in the large and medium enterprise space. IBM’s technology will be well incorporated into Lenovo’s efficient operations, Yang added.
As a part of the deal, IBM’s x86 server business global team will be shifted under Lenovo’s enterprise business group. Former IBM executive Adalio Sanchez will continue to lead the x86 server team at Lenovo, as senior vice president of Enterprise Systems, reporting to Gerry Smith, president of Lenovo’s enterprise business group.
