IBM 2Q Financial Call: Is Server Business Sale To Lenovo On Hold?


IBM on Wednesday talked about the potential negative impact of a large "divestiture project" on its full-year 2013, making it unlikely to happen soon and leaving unsaid whether or not the divestiture was the long-expected sale of its server business.

IBM, as part of its second quarter 2013 financial report, said in its report that it has updated its full-year earnings per share expectations to at least $16.25 per share, which includes a "net impact of $0.45 driven by the elongated discussions for its larger divestiture project."

IBM said that a "substantial second-half gain" it was expecting would not likely be achieved, a likely reference to disappointing talks between the company and Lenovo over a potential sale of IBM's server business.

 

[Related: Q1 Server Business Plummets: Key Findings From IDC]

During the IBM conference call discussing the second-quarter results and full-year expectations, Mark Loughridge, senior vice president and CFO for finance and enterprise transformation at IBM, referred a couple of times to that divestiture project without providing any details as to what the company was divesting itself of.

The divestiture project could likely be the long-expected sale of at least a part of IBM's server business to China-based Lenovo.

While IBM has declined to comment on whether it is indeed in discussions to sell its server business, Lenovo Chairman and CEO Yang Yuanqing in April said the China-based computer giant is in "preliminary negotiations with a third party in connection with a potential acquisition."

However, news reports after Yang's comments seemed to indicate that talks between the two broke down over how to set the price for the server assets.

IBM's server business has not been doing particularly well as of late. For the second quarter of 2013, sales of the company's Power Systems Unix servers fell 25 percent over the same period as last year, while sales of its x86-based System x servers fell 11 percent.

IDC in late May reported that IBM remained the industry's second-largest server vendor in the first quarter of 2013 with sales of $2.8 billion despite a 13.4-percent drop in server sales over last year.

For the second quarter of 2013, IBM on Wednesday reported revenue of $24.9 billion, down 3 percent compared to the second quarter of 2012. Revenue from the U.S. fell 4 percent over last year, IBM reported.

NEXT: Second Quarter 2013 Financial Results