IBM Partners Cheer Potential Sale Of x86 Server Business

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Of that, IBM's System x revenue fell 9 percent over last year, compared with a 32 percent drop in Power systems revenue and a 7 percent rise in System z mainframe revenue, IBM reported. System storage revenue dropped 11 percent over last year.

The drop in System x server sales is part of a long-term trend for IBM. Research firm Gartner estimated that IBM's x86-based server shipments fell 8.4 percent in 2012 compared with 2011, equating to a drop in x86-based server revenue of 3.5 percent. That was the worst performance of the top five server vendors and was much lower than the industry as a whole, which saw an overall rise in server sales.

The fourth quarter of 2012 was even worse, with IBM's x86-based server shipments down 12.8 percent while revenue was down 2.4 percent, Gartner reported.

However, those numbers don't tell the entire IBM server story.

First of all, IBM continues to have a very strong blade server business. IDC estimated that IBM had a 21.7 percent share of the blade server revenue in the fourth quarter of 2012, second only to that of Hewlett-Packard. The blade server business during the fourth quarter rose 3.3 percent over the same period last year compared with a 3.2 percent rise in the overall server business, although overall x86 server business rose 6.0 percent during that time.

Furthermore, IBM is basing part of its data center infrastructure plans on its PureFlex System converged infrastructure solutions based in part on its Flex System x86 blade server technology.

Todd Swank, senior director of product marketing at Equus Computer Systems, a Minneapolis-based system builder, said that an IBM-Lenovo deal would boost Lenovo's market momentum.

"A lot of custom systems companies are moving to reselling Lenovo," Swank said. "A deal with IBM would give Lenovo an excellent product line they could then combine with their low-cost manufacturing advantage. If you are a Lenovo reseller, it's good news. If not, it will be more tough down the road."

An IBM-Lenovo deal likely would have a major negative impact on the other top server vendors, particularly on HP, currently the top x86-based server vendor, and Dell, which is the second-largest vendor, according to solution providers.

Lenovo has used its low-cost manufacturing capabilities to expand its desktop and mobile PC business in the wake of acquiring that business from IBM to move from a third-tier, China-focused PC maker to second place behind HP, which is seeing its PC business quickly fall, IDC reported earlier this month.

HP, in dismissing calls to sell its own PC business, has long maintained that supply chain synergies between the PC and server business help reduce the cost of sourcing components for manufacturing such systems. Such supply chain efficiencies could help Lenovo cut the cost of manufacturing x86-based servers, making it more competitive vis-a-vis HP and Dell.

Lenovo already is using price to build up its North American channel. Lenovo this week caught the ears of attendees at the Synnex Varnex conference by saying VARs could purchase one ThinkServer RD630 for $299, more than 90 percent off the suggested retail price.

NEXT: Could Government And EMC Hurt The Deal?

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