It's Finally Official: IBM And Lenovo To Close X86 Server Deal Oct. 1


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IBM and Lenovo will make it official Wednesday, completing a $2.1 billion blockbuster deal to sell Big Blue's x86 server business to the China-owned technology giant. The deal positions Lenovo to be a global server powerhouse and channel giant, empowering its partners to go head-to-head with Hewlett-Packard, Dell, and Cisco.

"We are excited to see this day finally come," said Chris Pyle, president and CEO of Boca Raton, Fla.-based solution provider Champion Solutions Group. "We have been stuck in this partner purgatory for long enough."

After the deal goes through, Lenovo, the world's No. 1 PC maker, overnight becomes the third largest commodity x86 server maker behind HP and Dell, according to IDC.

[Related: Lenovo: Red Dragon Rising]

"Lenovo has big plans for the enterprise market. Over time, we will compete vigorously across every sector, using our manufacturing scale and operational excellence to repeat the success we have had with PCs," said Gerry Smith, executive vice president of Lenovo Group and president of Enterprise Business Group and Americas Group, in a prepared statement.

Along with IBM's x86 line of servers, Lenovo is acquiring a deep bench of channel know-how from Big Blue. The deal includes the transfer of 7,500 employees including Adalio Sanchez, general manager of IBM's System x business, IBM's System x senior management team, the entire System x development team, and IBM's System x sales and marketing operations, including channel managers and reps.

"IBM’s x86 business has always been the IBM red-headed step child compared to its mainframe business and software. At Lenovo it will be a flagship brand," Pyle said. "My sense is the x86 team has a sense of renewed vigor. The x86 team is really pumped. They are getting a lot of attention and the budget they need to really make a difference in the market."

Lenovo said Sanchez will continue to lead the Lenovo x86 team as senior vice president of Enterprise Systems, reporting to Gerry Smith, executive vice president of Lenovo Group and president of Enterprise Business Group and Americas Group.

Partners said Lenovo, which is widely seen as extremely channel friendly with over 80 percent of its $5.5 billion in North American commercial sales led by partners, is lining up its IT ducks and is poised to be a channel giant empowering partners to go head-to-head with HP and Dell.

As Lenovo reinvents itself as an end-to-end service provider, partners said their PC businesses will act as a springboard to selling other higher-margin products and services.

Lenovo is acquiring 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 its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances

But Lenovo partners concede that the Chinese computer maker faces unique challenges. For starters solution providers said the sale of IBM’s x86 business to Lenovo is just the start of looming security questions that Lenovo will face as it attempts to gain a foothold in the datacenter.

Additionally, its North American channel of 25,000 solution providers is comprised mostly of PC-oriented partners who are going to need to up their channel IQ to include more complex server deals higher up the datacenter stack.

"Lenovo needs to take baby steps right now," Pyle said. "The last thing they need to do is rock the boat." Pyle said Lenovo has spent a lot of time reassuring partners and customers that everything from maintenance contracts, to part numbers, to sales reps, are going to remain the same.

"Now, our priorities are to ensure a smooth integration and deliver a seamless transition for customers," said Yang Yuanqing, chairman and CEO of Lenovo, in a prepared statement. "By combining Lenovo’s global reach, efficiency and operational excellence with IBM’s legendary quality, innovation and service, I am confident that we will have competitive advantages to help us drive profitable growth and build Lenovo into a global enterprise leader."

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