IBM's x86 server business back on the market

Lenovo reportedly back in the bidding for the server business, but it's not alone.

It was widely reported last year that IBM attempted to sell off its x86 server business to Lenovo, which seemed logical as Lenovo had bought out the IBM's PC business a decade ago. However, the two firms could not come to financial terms and the deal was never struck.

Well, the rumors have started up again, only this time Lenovo has come competition, as Dell and Fujitsu are now being throw into the mix as possible suitors.

It's not hard to see why IBM wants out. x86 servers aren't a great business these days. They are squeezed on the low-end as small- to mid-sized businesses ditch their own data centers and move to a cloud environment. Last year I spoke to several CIOs of mid-sized companies who said their goal was to move everything to the cloud and turn the lights out on their data center.

Then there's a high end, with hyperscale cloud customers like Google, Amazon, and Facebook building their own systems rather than buying them. After that, there's just not a lot of hyperscale or high-end data center construction going on.

IBM does not break out its revenues and income or losses by product line, but Systems and Technology Group, i.e. the hardware division, has lost money for several quarters now. Hardware accounts for about 10 percent of IBM revenue anyway, so big iron is no longer Big Blue's focus.

It's also not hard to see why Lenovo would want the group. With the hardware would come a channel and its direct sales team and thousands of accounts worldwide. But then again, that's also why Dell and Fujitsu would want it as well. Plus, the System x line is far more than just x86 servers, with all kinds of advanced and unique technologies inside, such as Protexion, which keeps a server from crashing if one of the memory DIMMs fails.

The Wall Street Journal was first with the Dell rumors, while had the Fujitsu rumors.

Dell would have an easy time of it because it's now a private firm. It doesn't need to deal with Wall Street nosing into its business. At the same time, you have to wonder if Dell has the money for a buyout, estimated at around $3 billion. That leveraged buyout to go private was expensive and it needed a lot of loans. Plus, I thought the whole purpose of going private was so the company could reshape itself away from PC dependency.

Fujitsu is a stranger choice, and were the name not floated in the first place, I wouldn't guess it as a contender. It has a very small laptop business here in the U.S., notable because the monitors can rotate 360 degrees. It has a server business, the PRIMERGY x86 line and SPARC64 lines, but the company focuses primarily on Japan. If it's looking to expand worldwide with the IBM buy, it picked a hell of a time to do it.

I've listened to enough IBM earnings calls to develop a healthy respect for the company's retired CFO Mark Loughridge. He used to emphasize that IBM wasn't interested in commodity businesses. So the question then becomes if IBM sees x86 servers as a commodity business, and it's a money loser, why would anyone want it?

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