History could be about to repeat itself as China-based PC maker Lenovo is said to be in negotiations to buy up IBM's x86 server business, eight years after taking over Big Blue's personal computer division.
The move is being widely reported by various sources including The Wall Street Journal, Bloomberg and Forbes, but IBM and Lenovo are being reticent about the matter, as might be expected in the early stages of any possible deal.
An IBM spokesperson told V3 the firm does not comment on rumour and speculation, and Lenovo similarly declined to either confirm or deny the reports.
However, Lenovo has reportedly informed the Hong Kong stock exchange that it is in preliminary negotiations with an unnamed third party regarding a potential acquisition.
IBM caused a stir in 2005 when it sold its PC division to Lenovo, citing declining margins and a decision to put focus instead on services to enterprise customers.
Lenovo retained the well regarded ThinkPad and ThinkCentre product lines and has since gone from strength to strength in the PC market, and is currently the second largest vendor behind HP.
The firm even managing to expand sales in the first quarter of this year while other PC vendors saw sales decline, according to recent figures from Gartner.
A move by Lenovo to pick up IBM's x86 server business would now appear to make sense for both firms. IBM is said to be unhappy with dwindling margins from its commodity server products, while Lenovo currently has only a sparse ThinkServer line-up, largely targeting small businesses.
"Standard high volume servers make so little margin that it is not in IBM's interest to invest heavily in R&D here" said Clive Longbottom, service director at analyst Quocirca.
Getting rid of the low-end x86 servers would allow IBM to focus more on the still profitable mid-range systems and its mainframes, according to Longbottom.
"IBM is now betting on engineered systems through PureFlex - where it can still have x86 components, but with improved margin. It makes sense to look at letting the x-series server division go, then concentrate on PureFlex and how x86, Power and mainframe systems can work together to meet the needs of a multi-workload environment," he explained.
Meanwhile, Lenovo would gain a well-established server business that would help it expand more into the enterprise market and compete against rivals such as HP and Dell that offer a one-stop portfolio of hardware and services.
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