The day has finally come; Lenovo Group Ltd. is ready to take over IBM’s x86 server business. According to the Chinese multinational computer technology company, it will be closing the $2.1 billion deal on Wednesday, October 1. This acquisition will give Lenovo the power to beat its US rivals more comprehensively.
In January, Lenovo revealed that it is looking to take over the x86 server division of IBM for $2.3 billion. When announcing the final date of the acquisition the Chinese tech firm informed that the amount went down to $2.1 due to deferred revenue liability and change in valuation of inventories. According to reports obtained from reliable sources, IBM will receive around $1.8 billion in cash and the rest in the form of stocks.
Wednesday’s acquisition will be the first by Lenovo since it took over Hewlett-Packard Co in 2013. It’s not that there were no talks of any other acquisition in between. In the first quarter of 2014, the Chinese tech firm was planning to take over Google’s Motorola smartphone unit; Lenovo even said that it is willing to pay a whopping $2.9 billion to overtake the smartphone manufacturing company.
Yang Yuanqing, the CEO of Lenovo, said that this IBM deal will act as a perfect growth engine for the Chinese firm. Yuanqing added that he is expecting the newly acquired server business to produce at least $5 billion revenue in the coming one year.
According to the CEO, his company is looking to use IBM’s rich technology to offer stiff competition to brands such as Dell and HP in the medium and large enterprise space. Yuanqing is hoping to combine IBM’s technological prowess with Lenovo’s highly efficient operations.
It’s true that the x86 server division of the American multinational company has trailed the server businesses run by Dell and HP; however, Lenovo possesses the ability to compete in the toughest of markets, a quality is has shown for years as the world’s biggest PC maker.
Here, it must be mentioned that at present Lenovo sells a series of low-end servers under the brand name of ThinkServer. The company decided to take over IBM’s x86 server unit to allow its high-end machines perform database-related jobs and complex analytics.
For those who are wondering about the kind of leadership the newly acquired Lenovo division will be under: Adalio Sanchez, the former IBM executive will continue to lead the server team at x86. Sanchez will be reporting to Gerry Smith, the president of the Chinese company’s enterprise business group.