China’s Lenovo is closing in on its target to acquire IBM’s server division.
In a bid to drive up its profit, Lenovo is reportedly pursuing a $2.1 billion deal to acquire IBM’s x86 server division by October 2, 2014. Through this acquisition, the world’s largest PC maker is expected to attain more flexibility to expand in the global market, as it is still a relatively small player at the global level.
Through this deal, Lenovo guarantees itself the position of the world’s third-biggest server vendor by market share, right in the line of challenge behind Hewlett-Packard and Dell. The company expects a revenue of $5 billion in the first year itself from its newly bought server unit, since it will become the largest server provider in China.
The catalogue of Lenovo’s acquisition includes IBM’s System x, BladeCenter blade servers, blade networking and maintenance operations , along with several software products. IBM will, however, retain its System z mainframes and its Power architecture-based server product line.
As per the agreement, the deal will proceed with a $1.8 billion payment in cash, while the rest will be paid in stock. Following the closing, Lenovo will be joined by around 6,500 IBM employees across 34 R&D centers and seven manufacturing facilities around the world.
IBM will continue its presence in the Chinese server market after the deal is closed, as it had made its own association with Chinese server vendor Inspur to develop Power-based servers.
Currently, Lenovo is reported to be working on another multibillion acquisition of the Motorola Mobility unit from Google to inflate its smartphone portfolio.
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