It is very seldom that history repeats itself and a similar storyline re-emerges. Lenovo and IBM are both back at the negotiating table after doing the very same thing a few years ago. For those not sure – IBM sold their notebook business to Lenovo.
Last week news broke that current negotiations between Lenovo and IBM had broken down. It appears as if IBM is trying to offload their server business to Lenovo. It seems that IBM is in the process of a paradigm shift towards becoming a software only business. The jury is out whether that is the correct strategy as other businesses such as Samsung, Microsoft and Google are trying the exact opposite strategy. Being able to manufacture both hardware and software is the ultimate strategy for making great products (Apple is the poster child of this strategy).
The negotiations had a few sticking points as company and business division valuations supposedly lead to a break down in talks between the companies. IBM might be using this strategy as a tactic to ensure them making more money for their server division. The server business would add a significant business to the offering from Lenovo. Suddenly they will be able to be seen as an enterprise solution for large corporate businesses that need to acquire servers. The server industry is a highly profitable one (just have a look at the impact servers have for HP’s balance sheet for reference).
The negotiations might have stalled for the moment, but I think by year end Lenovo might be in the server industry as well. I wonder what IBM plans to do with the capital it receives from Lenovo..
