Managing a business divestiture. IBM closes sale of x86 server business to Lenovo.

Managing a business divestiture. 

IBM closes sale of x86 server business to Lenovo on 1st Oct.

 

On 1^st 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.”