Lenovo to Buy IBM Low-End Server Business

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By Trey Thoelcke Published
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Although recent speculation had Dell interested in acquiring International Business Machines Corp.’s (NYSE: IBM) low-end server business, it was Lenovo that won the prize. A deal to sell the so-called x86 server business to Lenovo fell through last spring when the parties could not agree on a price. In the new deal, the Chinese personal-computer maker has agreed to pay $2.3 billion in cash and stock.

Lenovo aims to expand its business for corporate clients beyond office PCs, and the deal reflects the broader trend of China’s growing investment in U.S. companies. It could still face hurdles if U.S. regulators decide to review the acquisition by a Chinese company of a U.S. business tied to critical technology or national security. The U.S. Congress and the U.S. Committee on Foreign Investment closely scrutinized the 2005 deal when Lenovo bought IBM’s PC business.

Over the past several years, IBM has sought to rid itself of low-margin businesses as it focuses more on areas such as software and services, a move that helped it avoid some of the pains felt by now closely held Dell and Hewlett-Packard Co. (NYSE: HPQ). IBM sold its personal computers business to Lenovo for just that reason.

But 2013 was a difficult transitional year for IBM, after bringing a new chief executive officer on board. Competition between IBM, HP, Oracle Corp. (NYSE: ORCL) and others has grown fierce due to weakness in overall information technology spending among enterprise customers. And IBM was the sole Dow Jones Industrial Average component to lose ground in 2013.

IBM shared its latest quarterly results this week. Earnings were better than expected, due largely to cost management and stock buybacks, but revenue contracted more than expected.

Photo of Trey Thoelcke
About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.

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