Managing a business divestiture.
IBM closes sale of x86 server business to Lenovo on 1st Oct.
On 1st October 2014, the initial
closing of the sale of IBM’s x86 server business to Lenovo started in most of
the markets, including Asia Pacific. The 7,500 employees that work within the
x96 unit across the globe will make the move to Lenovo’s Enterprise Business
Group headed up by ex-IBM executive Adalio Sanchez. This divestiture is a significant, strategic
milestone for IBM and STG.
1. WHAT CHANGED
The IT world has seen this x86 server become
a fast-growing and lucrative technology that lifted sales at companies like HP
and Dell, which still relied on them for billions of dollars in sales. As when IBM sold its personal computer
business to Lenovo in 2005 which sparked success at both companies, this sale
signals a change in the computing market.
Despite the competition, buying IBM’s x86
server business is a boon for Lenovo. Enterprise products are generally a
higher-margin business than consumer gadgets. Lenovo’s own manufacturing
capabilities and sales channels could help squeeze out more profits from the
server sales.
2. THE BUYER'S VIEW
Yang Yuanqing, Chairman and CEO of Lenovo
said, “Lenovo will add a world-class business that extends our capabilities in
enterprise hardware and services, immediately making us a strong number three
in the global server market. By combining Lenovo’s global reach, efficiency and
operational excellence with IBM’s legendary quality, innovation and service, I
am confident that we can drive profitable growth.”
3. THE SELLER'S VIEW
On the other hand, IBM is turning its focus
to higher end systems where it can generate competitive advantage. “IBM will intensify the focus on our Power,
mainframe and storage systems, where we can apply IBM’s valuable research and
development capabilities to differentiate our offerings. As we innovate in areas such as big data and
cloud, allowing clients to capture value from opportunities in these segments.”says
Tom Rosamilia, Senior Vice President of IBM Systems & Technology Group.
4. THE TRANSITION
Over the nine months, IBM has been preparing
for this transition with a few key investments, including $3 billion in new
chip technology to help IBM remain the systems innovation leader, $1 billion
investment in Linux and open source technologies for Power Systems, $1 billion
investment in Flash storage technology, and billion dollar investments in
Watson ad cloud. These investments will help fuel renewed vitality and growth
in our core STG businesses.
At such critical times, one server competitor
who was fearful of the combination of IBM’s size and Lenovo’s profitability, showed
their true colours with blatant competitive ads to undermine the confidence of
customers and business partners on the server business. We have chosen to ignore these ungentlemanly acts
as baseless.
5. STEADYING THE TROOPS
I am privileged to be involved in the
transition of the x86 team to Lenovo. We
have been going through a lot of planning for the integration of the business
and a quick transition turnover of the business systems that supports how we
operate. IBM will continue to provide
maintenance services to existing System x customers to ensure the transition
between IBM and Lenovo is seamless. IBM
marketing has also been designed to support Lenovo marketing to ensure that our
strong demand generation capabilities are transferred.
To the departed x86 colleagues, remember the “I
love System x” campaign where you have demonstrated team work and confidence in
our technology, regardless of the fear of the unknown new company. Here’s a encouraging quote “Sometimes what
you’re most afraid of doing is the very thing that will set you free.” I wish you success in your new company.
To the IBM Systems & Technology Group
team that remains, I wish you what I have experienced in supporting the
transition. I have learnt so much more about the business, processes, people, differentiation
and competitive advantage. “A smooth sea
never made for a skilled sailor.”
