Chinese firm Lenovo to buy IBM's server business for $2.3 billion

Chinese computer maker Lenovo said it would pay $2.3 billion in cash and stock for IBM’s server business, a deal that comes nearly a decade after Lenovo bought IBM's ThinkPad unit that helped the Chinese firm eventually become the largest personal computer manufacturer in the world.

The deal announced Thursday would be one of the biggest Chinese overseas acquisitions and reflects the steadily increasing flow of Chinese outward investments, particularly to the U.S.

With more than $14 billion directed to the American market last year, the U.S. became the largest recipient of Chinese overseas investment in the last decade, according to Derek Scissors, a scholar at the American Enterprise Institute who has been tracking Chinese foreign investments for many years. 

For Lenovo, the agreement to buy IBM's so-called x86 server operations fulfills its long desire to build up its global market in that line of business. 

“With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, we are confident that we can grow this business successfully for the long-term, just as we have done with our worldwide PC business,” Yang Yuanqing, Lenovo's chairman and chief executive, said in a statement. 

In 2005, Lenovo bought IBM's personal computer business for $1.75 billion, lifting the then-little known Chinese company into the ranks of the biggest global manufacturers of personal computers. Since then, it has overtaken Dell and Hewlett-Packard to become the biggest personal computer producer.

Lenovo said it would offer employment to abut 7,500 of IBM's staff in cities including Raleigh, N.C.; Shanghai, Shenzhen and Taipei.

For IBM, the sale of its server business would allow the Armonk, N.Y.-based company to focus on its core mainframe, power systems and other hardware as well as its software products and services.

“This divestiture allows IBM to focus on system and software innovations that bring new kinds of value to strategic areas of our business, such as cognitive computing, Big Data and cloud,” Steven A. Mills, senior vice president at IBM Software and Systems, said in a statement.


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Copyright © 2014, Los Angeles Times
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