Dell, Lenovo Both In Talks To Buy IBM's Server Business

Dell partners said the acquisition of IBM's server business would be a game-changer, helping them kick their enterprise businesses up a notch. According to two independent reports, IBM is in talks with both Dell and Lenovo to sell its low-end server business, worth an estimated $4.9 billion in annual sales.

"Dell would not only acquire a lot of valuable patents, it would also gain a valuable calling card into some very lucrative high-end IBM accounts. It cracks open those [IBM] accounts and would allow us to start selling Dell's full solution to some attractive customers," said Scott Winslow, president of Winslow Technology Group, a Boston-based solution provider and Dell partner.

Citing sources close to the negotiations, a Monday The Wall Street Journal report said that IBM is in active negotiations to sell its x86 server hardware business with a number of different suitors. The Journal reported that Dell and Lenovo were in talks to buy IBM's server business. The terms of the negotiations aren't clear, however, the Journal reported that Lenovo was hoping to pay $2.5 billion.

[Related: HP Tops Weak Server Market As Dell Tanks: IDC ]

Dell, IBM and Lenovo declined to comment to CRN for this report.

"If Dell acquired IBM's server business, it would be a dog fight between Hewlett-Packard and Dell in the server share horse race," said Jed Ayres, Chief Marketing Officer at MCPc, a Cleveland-based national solution provider. "It would also be a boon for Dell partners, opening up the door to sell more sophisticated Dell end-to-end solutions to enterprise IBM customers."

"For Lenovo, it would put them in the game. Lenovo would have a clear path into the data center," Ayres said.

Last April, Lenovo and IBM entered negotiations to sell Big Blue's server business. But those negotiations fell through. At the time, Lenovo was seen as a desirable candidate because IBM didn't view Lenovo as a threat to other parts of its business.

IBM's server division would energize Lenovo's lackluster server business, giving them overnight credibility in the server market.

For one Lenovo partner, who asked not to be identified, IBM's server business might present too much of a challenge. "There is no question that Lenovo becomes a competitive player if they buy IBM's server business, but the question is, do they have the right channel DNA to aggressively sell into the data center? I don't think so. When it comes to the channel, Lenovo doesn't have the right type of partners. They would have to reinvent themselves and bring in a lot of new blood to make it work."

Any deal to sell IBM's server business would encompass its System x line, which includes Intel- and AMD-based tower, rack and blade servers. IBM is reportedly seeking $4 billion for its x86 server business, according to the Journal report. IBM’s x86 servers brought in about $4.9 billion for the company in 2012, according to estimates by financial analysts at Morgan Stanley.

"I'd love to see Dell pick up IBM's x86 server business. When you look for companies out there in the business doing end-to-end complete solutions from services, storage, cloud, servers and security, there are only a few players," Winslow said. "Dell, HP and IBM are the first ones that come to mind. If IBM wants to get out of the server business, let it. That leaves Dell and HP to battle it out."

According to IDC research in the third quarter, HP was the world's largest server vendor by revenue, with a 28 percent share of the market, followed by IBM with 23 percent and Dell with 16 percent. Last May, Lenovo launched its RD530 and RD630 ThinkServers, which it called its first "enterprise-ready" servers.

PUBLISHED JAN. 21, 2014