IBM, Lenovo Execs Answer x86 Server Sale Questions

What's Next?

If the deal is approved, the $2.3 billion blockbuster sale of IBM's low-end server business to Lenovo would create a new x86 server behemoth. Lenovo would become the world's third largest x86 server maker -- behind Hewlett-Packard and Dell -- with 11 percent market share, according to research firm IDC.

According to Lenovo, the deal will take six to nine months for regulatory approval. In the interim, IBM and Lenovo partners are asking soul-searching questions about how exactly their business might change.

Here, IBM and Lenovo executives answer media and analyst questions during a conference call.

What Can Customers Expect Once The Deal Goes Through In Terms Of A Transition Between IBM And Lenovo?

Following the closure of the transaction Lenovo will assume customer-related and maintenance operations. Having said that, IBM will continue to fulfill maintenance and delivery for x86 hardware on behalf of Lenovo. Customers should see very little -- if any -- change in maintenance support delivery and who they call and who repairs their machines.
-- Adalio Sanchez, general manager, IBM System x

Does This Deal Face Special National Security Scrutiny Given The Deal Involves IBM And China-Based Lenovo?

The plan is to close the deal in six to nine months. Obviously, we will conform with all regulatory authorities and in all the countries we do business in. We expect after we engage with them and start working through the deal -- and the commodity nature of these products -- our reputation and strong compliance record of doing things right [mean] we won't have any issues. We have full confidence that we will close.
-- Tom Rosamilia, senior vice president, IBM Systems & Technology Group and Integrated Supply Chain

How Will This Impact Lenovo's U.S. Workforce?

Essentially, this deal doubles Lenovo's presence in the North Carolina area. As you know, we already have a large facility in Morrisville, N.C., just outside the Research Triangle Park area. We also have manufacturing facilities in Winslet, [N.C.]. With this deal and all the IBM employees, we almost double our presence in North Carolina.
– Peter Hortensius, senior vice president, Lenovo

How Will This Impact Channel Partners That Sell x86 Products And Services?

It is going to be very positive for channel partners. If you look at IBM and Lenovo, there is some overlap today. But what Lenovo has within its PC and server business and how IBM goes to market with System x -- there is room for expansion for partners.

Lenovo has products on the low end of the scale that, quite frankly, we don't have. Those products will allow us to have a broader portfolio going forward for existing channel partners. IBM has a full network of value partners and value distributors and now we have a better set of capabilities, flexibility and ease of doing business that we're able to capture for better performance with them.
-- IBM's Sanchez

How Will This Impact Lenovo Channel Partners That Will Sell X86 Products And Services?

Lenovo's track record working with the channel speaks for itself. We are a very channel-focused company. The feedback we have gotten from channel partners has been very positive on this. We have a number of partners that already do business with both IBM and Lenovo and some that are IBM-unique and Lenovo-unique. This provides opportunities for all of them. We are very bullish on what this means for the Lenovo channel.
-- Lenovo's Hortensius

From IBM's Point Of View, How Will This Impact Lenovo Channel Partners?

This is a great opportunity for the channel to expand their capabilities and add value. Partners will be able to leverage and extend capabilities with IBM's x86 server business and also leverage IBM's portfolio of server, mainframe and storage products. We believe the combination of these three things will strengthen the channel and the power it has in the marketplace, giving Lenovo partners the ability to compete much more broadly and deeper in the marketplace than today and therefore add more value to the clients that they support.
-- Stephen Leonard, general manager, sales, IBM's Systems & Technology Group

What Was Stopping Lenovo From Building Up Its Own x86 Business And Succeeding?

If you ignore time, nothing was preventing us. But what this deal gives us is accelerating our strategy by five years. It gives us full end-to-end capabilities in terms of development sales and linking that together with a very strong supply chain. Frankly, it would have taken us five years to build up something similar. I think that some of the products, it would have taken even longer. For us, this was a fast way to do something that we were already planning on doing.
-- Lenovo's Hortensius

How Is Lenovo Going To Succeed Where IBM Was Not Able To Succeed?

At the end of the end of the day, both companies have strengths and weaknesses. Our strengths really align to the high-volume space and being able to play well in a commodity-oriented market. That's something we think that this business can greatly benefit from and that's what we hope to apply to this business.
-- Lenovo's Hortensius

IBM is No. 3 in the market for x86 servers and we are No. 1 or No. 2 in some emerging markets. So I question the comment on success. I think the combination, however, brings us tremendous value coming together to make us both have to take it to another level.
-- IBM's Sanchez

Does This Put Lenovo Into The Services Business?

Lenovo will provide maintenance services against all of its products. But if the services are closely aligned to the box, we will also provide that but we will also use channel partners to provide a lot of services. So, we don't see a conflict here; we see opportunities.

Frankly, when you consider any large kinds of services and consulting business with customers, this is where the alignment with IBM makes complete and total sense. IBM is a partner that is well versed in these products and is very capable and ready to go.
-- Lenovo's Hortensius

Do You Anticipate Any Channel Overlap Between Lenovo And IBM When It Comes To Working Together In The Channel?

At the end of the day, I see a lot of alignment. Today, when IBM is selling those solutions it's the x86 hardware coupled with the IBM software. In the future, regardless of who ends up selling it, it's the x86 software and hardware. So there is no reason why we shouldn't be able to make these deals complementary and continue to deliver the same value to customers as we are today.
-- Lenovo's Hortensius