Lenovo has confirmed that it will be paying $2.3 billion for IBM's low-end server business, successfully concluding a deal that had been off and on since a year earlier when the two parties failed to agree on the price of the servers.
According to The New York Times Lenovo said it would settle the transaction with a $2 billion in cash and the balance in its own Hong Kong-listed shares. About 7,500 IBM employees in locations including Raleigh, N.C., Shanghai and Shenzhen in China, and Taipei, Taiwan, were expected to be offered employment by Lenovo, the Chinese company said in a statement.
"With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, we are confident that we can grow this business successfully for the long-term, just as we have done with our worldwide PC business," Yang Yuanqing, Lenovo's chairman and chief executive, said in a statement, referring to the server industry.
Last year, IBM wanted at least $4 billion for the unit that Lenovo only valued at about $2.5 billion. The negotiations about the unit included IBM's x86 server business.
After the two couldn't come to terms, IBM restarted talks with interested parties recently. Dell and Fujitsu were among the other bidders. Lenovo was reportedly in a better position to scoop up the purchase faster due to it having already done research on the units.
Lenovo used the purchase of IBM's ThinkPad personal computer business in 2005 for $1.75 billion to overtake HP and Dell and become the world's largest manufacturers of personal computers.
This deal allows IBM to continue to transform its business model from a primarily hardware producing venture to a provider of services and software for businesses and governments.
"This divestiture allows IBM to focus on system and software innovations that bring new kinds of value to strategic areas of our business, such as cognitive computing, Big Data and cloud," Steven A. Mills, senior vice president at IBM Software and Systems, said in a statement.
