back to article It was inevitable: Lenovo stumps up $2.3bn for IBM System x server biz

IBM has offloaded its failing x86 biz to Lenovo for $2.3bn, albeit a day later than our sources had predicted. The pair have entered into a definitive agreement - days after talks were confirmed - which includes System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and …

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  1. Anonymous Coward
    Anonymous Coward

    Privacy concerns

    If its true that a number of multinational government and to a lesser extent coprorations have banned Lenovo client devices from their networks due to privacy concerns. Surely this acquisition could be a positive for Dell/HP and their "low end" server requirements with some being forced to procure non Lenovo spy boxes?

    1. Gordon 10 Silver badge
      Meh

      Re: Privacy concerns

      Im sure these rumours can be put to bed fairly easily. It wouldnt be hard to put some traffic analysis on mid-senior level mgt's laptops and wait to see what happens.

      Im pretty sure that the scale of it makes it difficult - why nobble a laptop when you can nobble a server, router or switch? Why nobble a router when you can nobble a firewall appliance. Why nobble a firewall when you are tapping the cables and network end points anyway.

      Given that it would have to be at bios/component level on a laptop anyway - Im fairly confident that when state actors need to target a laptop they do it by actively attacking it instead of relying on some passive measure pre-installed.

      After all if even 1 rootkit, backdoor is found soley in 1 manufacturers kit on an industrial scale - that manufacturers business instantly goes down the pan.

      1. ben_myers
        Happy

        Re: Privacy concerns

        Agreed! Why cobble up a BIOS with spyware that can easily be detected. But paranoia reigns in governments, along with lots of other irrational thinking.

    2. Anonymous Coward
      Anonymous Coward

      Re: Privacy concerns

      "System x employs 7,500 people worldwide and IBM said they are "expected to be offered employment by Lenovo"."

      At least until they can be replaced by cheaper Chinese resources or Dell rejects anyway...

      1. Anonymous Coward
        Anonymous Coward

        Re: Privacy concerns

        In the UK, maximum 18 months after TUPE and they'll all be offered "apply for your own job in Bratislava at 1/3rd your current wages or F off"

        Best to start applying for jobs now; the redundancy money ain't so good that you can afford to chance having to live off it indefinitely

  2. Little Me

    Time to shine :)

    Assuming enough of the right people and teams get to move over, I expect the former IBM x86 world to really have a chance to shine now that it will be part of company that actually wants it.....oh and it does not have to worry about upsetting other parts of IBM....*cough* power

    1. Anonymous Coward
      Anonymous Coward

      Re: Time to shine :)

      Yes, it's always amazed me how Wall Street likes mega corporates so big that for a given division the main competitor tends to be part of the same company, leaving the executives to fight turf wars within the company rather than getting on with business.

      HP is an example of a company that might be much, much better broken up, especially if the laser and inkjet printer divisions were spun off so they can actually compete with one another.

      1. Chris Miller

        Re: Time to shine :)

        Are lasers and inkjets in competition? Surely they serve different markets. When was the last time you agonised about whether to buy one or the other? High-end x86 servers and Unix boxes, on the other hand, provide a genuine choice if you want say a DB server.

        1. Peter Gathercole Silver badge

          Re: Time to shine :) @ Chris Miller

          Strange you mentioned printers. Remember that Lexmark used to be IBM's small and medium end printer business before it was spun off.

          What amazed me at the time was that IBM spun off Lexmark, and then almost immediately introduced new ranges of laser printers that directly competed with the Lexmark product range!

        2. Anonymous Coward
          Anonymous Coward

          Re: Time to shine :)

          You could perhaps ask yourself why laser and inkjet printers serve different markets. Why are inket printers segmented into toys, photo printers, proofing printers and digital presses, which overlap the entire laser gamut?

          In fact HP has tried to make full size office inkjet printers - they tried to downsize the Indigo technology and called it Edgeline - but they were not a success. On the face of it, laser printers are a terrible technology - dangerous toner dust, delicate moving parts and expensive consumables, with high power consumption - while inkjets should offer complete safety, cheap consumables and low power. As someone who has been following HP printing technology from the mid 1990s to 2012, I've often felt that the two operations should go their own way, because it seems at least possible that any inkjet technology which would displace lasers gets somehow disadvantaged. (Plus the whole consumer version of sell the machine at a loss and sell ink at 2000% margin turned out not to be that bright in the long term.)

          Meanwhile Xerox has extended the range of its wax printers up to the large office 9300 series, thus paralleling almost the entire laser range.

          1. Steve Knox

            Re: Time to shine :)

            On the face of it, laser printers are a terrible technology - dangerous toner dust, delicate moving parts and expensive consumables, with high power consumption - while inkjets should offer complete safety, cheap consumables and low power.

            Last time I had an inkjet, I was replacing each cartridge annually, at a total cost of $120 per year (black and 3 colors). Then in 2006 I bought a laser printer and just replaced the black toner in December 2013. I also bought the color toner, as it's about to run out. Total cost: ~$400 for 7 years, or ~$57 per year.

            15 years ago, I had to review Material Safety Data Sheets for the toner and ink for a college which had both inkjets and laser printers. Suffice to say the ink was no less dangerous than the toner, just dangerous in different ways. At that time I also reviewed consumables costs, and the difference over the lifetime of the machines was negligible.

            Aside from HP's 1100 series (a truly horrible range of equipment) I have yet to see a laser printer die in less than five years. I've seen way too many inkjets break within a year because of cheap components.

            Inkjets do use less power, but the manufacturers' strategy of subsidizing the purchase price with expensive inks has led to cheap quality and high consumables cost, making them no more cost-effective than laser printers, except possibly in situations where electricity is quite expensive.

        3. Steve Knox

          Re: Time to shine :)

          Are lasers and inkjets in competition? Surely they serve different markets. When was the last time you agonised about whether to buy one or the other?

          2006.

          Of course, that was also the last time I bought a printer.

        4. John Savard Silver badge

          Re: Time to shine :)

          They're both printers that let you print with an almost endless assortment of typefaces, producing output that looks almost good enough for a book, although it might lack that last measure of crispness. So, yes, a large company making low-end laser printers as well as high-end ones might be tempted to hobble its inkjets. Especially when fax machine and printer combinations have been made with either laser or inkjet printer mechanisms.

    2. dssf

      Re: Time to shine :).... I wish that that would happen with SmartSuite

      Since IBM is ditching support for Lotus SmartSuite in Sept of 2014, I hope a "white night" shows up and strips S/S from IBM, eviscerates the problemmatic stuff (tied to non-forthcoming patent owners), and replaces those bits with modern code not envisaged by the patents that purportedly deterred IBM from making any meaningful, heartful improvements to SmartSuite.

      I wish Lenovo threw in an extra $100m and acquired it and then would bring in some kewl Open Source devs to bring SmartSuite into year 2014, instead of languishing in 1998/1999.

      1. Anonymous Coward
        Anonymous Coward

        Re: Time to shine :).... I wish that that would happen with SmartSuite

        I guess Notes will be ditched next. It's a lonely dinosaur waiting for a suitably large asteroid to hit....

    3. ben_myers

      Re: Time to shine :)

      One other issue. IBM remains top-heavy with corporate overhead. The only way to support it is with lucrative high-end products and services. Well, Thinkpads and desktops weren't lucrative enough for IBM, due to the severe pressures of a commodity market. Low-end servers fall in behind.

  3. Anonymous Coward
    Anonymous Coward

    Where does that leave IBM HPC sales

    This pretty much closes off IBM's HPC sales to many Western organizations.

    It was looking pretty shaky with no follow-up IH system to the p7-775, but I just can't see a lot of IBM's existing IH and iDataPlex customers in the so-called Western Hemisphere continuing to buy any Flex or NeXtScale systems, and as Flex was being pushed in the commercial Power market, a number of large commercial customers must also be considering their next procurement programmes.

    Cray, HP, Bull and Fujitsu must be laughing their heads off!

    1. Allison Park

      Re: Where does that leave IBM HPC sales

      There is no profit in HPC sales...the only reason people play in the market is to try and pay for the large fixed cost of development. In the intel world you wont see the major mfg's signing up to lose money to help intel pay for their fab costs.

      1. Anonymous Coward
        Anonymous Coward

        Re: Where does that leave IBM HPC sales

        If there really were no profit in HPC, then Cray would not exist.

        I know that they rely very heavily on large US government contracts, and that they have had to be resurrected more than once, but they do not have any other arms to prop them up.

        Looking at the people who do play (Cray, HP, SGI, Bull), they are all pitching x86_64 or hybrid systems involving x86_64 processors, and IBM's highest volume HPC systems, iDataPlex, and it's follow-up NeXtScale, are also x86_64 based, and I'm sure iDataPlex returned profit. These will go to Lenovo, leaving IBM nothing in their current catalogue apart from BlueGeneQ which looks a little dated, and the Power 755 clusters, which were only small systems anyway. IBM will still build you a Power7 775 system if you ask them to (and will soon have some quite large second-hand ones that they may want to shift), but there is no direct follow-up product announced (or, as far as I'm aware, any planned).

  4. Peter Gathercole Silver badge
    Alert

    IBM have bet a lot on Cognetive Computing and Cloud

    If they turn out to be a real bust, and don't get customer engagement, IBM is going to be looking very much weaker with a significantly reduced hardware portfolio.

    I wonder when they are going to drop the "Machines" part of "International Business Machines" because they no longer make enough hardware.

    1. Gordon 10 Silver badge

      Re: IBM have bet a lot on Cognetive Computing and Cloud

      I was thinking similar thoughts. One CEO's non-core business could easily turn into anothers core business. **cough**Intel**Xscale**cough**

    2. Anonymous Coward
      Anonymous Coward

      Re: IBM have bet a lot on Cognetive Computing and Cloud - drop the machines

      Never, because rebranding themselves IBS would be a pain in the gut.

      1. Anonymous Coward
        Anonymous Coward

        NCR Did It!

        And look what happened...

  5. Erik4872

    Hope they don't mess it up...

    Well, I guess it was inevitable, but it's definitely a shift. Now that IBM is out of the retail POS business, the printer business, the disk drive business, the PC business, AND the server business, it's going to be very hard to point to an end-user facing "business machine" that would convey the IBM brand.

    I hope Lenovo actually plans on innovating at the high end of the server line like IBM did rather than just dumbing everything down to commodity boxes. There are still quite a few workloads that don't really belong on a cloud, and having some of IBM's monster System x boxes to virtualize stuff on is helpful.

    One thing I did like about IBM was that, even though their support site is crap, if you had a contract they would bend over backwards to make sure things worked. Lenovo did keep business support for their non-consumer desktops in the US, and I've had nothing but good luck calling up and asking questions. IBM's System x phone support has been some of the best I've dealt with and I hope Lenovo keeps those knowledgeable guys in Atlanta employed. Plus, it's nice having a CE who actually knows about the equipment they're working on.

    I'm mostly happy with the way Lenovo handled the PC transition, but I sharply disagree with their consumerization trend on the high-end ThinkPads I love to use. My last IBM-style ThinkPad died (the T510) and I just purchased a T540 from them...they're chasing Apple and the low-end consumer laptop crowd at the same time with this new design. Let's hope this doesn't spill over into the System x line.

    So what does IBM actually do now? :-) (Yes, I know they do a ton of stuff...but your average consumer now will have no idea who they are. Kind of like Accenture or their ilk.)

  6. Anonymous Coward
    Anonymous Coward

    IBM HW: going out of business?

    It's hard to see how this move spells nothing short than the beginning of the end for all of IBM HW. Divesting the servers business cuts deep into the flesh of IBM HW, and there'll be no turning back from this shift.

    At first it was rumoured that only the low-end servers will be sold, i.e. tower servers and 1U/2U rack mounts.

    But eventually it unfolds that all of the blades / Flex / iDataPlex / NextScale servers are going. I.e. *all* the servers, bar P-Series, Power Flex blades, and PureApps/PureStorage appliances.

    P-Series are a niche market and a declining one at that, and having the bulk of X-Series and Flex infrastructure shifted to Lenovo will just accelerate the demise of this market.

    PureApps/PureStorage are based on Flex in the first place, and without having Flex development in house they're as good as dead in the water.

    With servers tumbling, it's not a long way to go before storage is divested as well. The trend to converge servers and storage (e.g. Nutanix, Simplivity, Maxta): IBM is out of that market now. The trend to do storage on the servers (e.g. ScaleIo==EMC, VMware's VSAN, HP Lefthand): IBM is out of that market as well now.

    One can guess than the Mainframes with their DS8000 storage will be the last to go, but the way things are going it's just a matter of time.

    1. fishman

      Re: IBM HW: going out of business?

      If the iDataPlex line is going, it will be a nice boost for SGI and Cray.

    2. John Savard Silver badge

      Re: IBM HW: going out of business?

      IBM has decided that x86 servers are a commodity, and they don't want to sell commodity products. Their mainframe and AS/400 products (System z and System i) are specialized products that can command premium prices. They want to be Apple, not Dell.

      Apple not selling Windows PCs or Apple ][ systems is not the beginning of the end of the Macintosh. Any problems that Macintosh or z/Architecture sales may have don't have anything to do with Apple or IBM not also selling machines that compete with those systems.

      Not that Apple couldn't make money if it switched to making and selling commodity Windows PCs if nobody wanted Macintoshes any more; only a few small changes in their product would be needed.

  7. Levente Szileszky

    This is it...

    ...for large-scale HW R&D, that's for sure. For starter you need scale to get the right prices - and with all storage now running on x86 it's hard to see what kind of prices you would get without the scale of ordering chips for your x86 servers... I don't see IBM running its storage business for too long either - too bad, the announcement of the new FlashSystem 840 last week was a sign of good things coming... I give their storage business another 2-3 years and they will pass it to Lenovo (or perhaps Dell) as well.

  8. Anonymous Coward
    Anonymous Coward

    Lenovo Mainframe?

    Anyone?

  9. Mark Cathcart

    can you define beat-off as it relates to Dell?

    Acquiring an x86 server business has it benefits. Trying to to merge a completely different x86 business with your existing x86 servicer business and make it profitable is another entirely. If Dell were interested in this they'd have to come up with some form of integrated management offering as there would be no financial benefit of running two incompatible systems management platforms, two different management platforms for blades etc.

    I note you did not mention systems management, how to configure bios, managed access to shared components, monitor and recover from temporary errors, failover on permanent errors etc. Did Lenonvo get source code for IBM System Director? While the Intel x86 is common pretty much everything else isn't.

    So, define beat-off Dell?

    In full disclosure, I am an Executive at Dell... only these days I work in Software Group :)

    1. This post has been deleted by its author

  10. PowerMan@thinksis

    Alternative view

    This will be a long winded view of what I see happening that differs from many of you. This announcement is a good thing for IBM, Lenovo and customers. Lenovo, who is the #1 global PC vendor clearly wants to move into the enterprise with a quality x86 kit that includes converged capabilities. IBM System x and Flex is the obvious platform. They pick up a technology rich X6 platform along with solid entry level 2 socket sockets servers. They also pick up the extremely flexible Flex chassis that is truly converged in within the chassis unlike the competitors which are merely an assembly of best of breed by their own definition. I'm not selling the features, just stating the facts.

    I do not have all of the details but this announcements is a win-win-win as IBM will pick up the supply chain efficiencies of Lenovo to lower the cost of manufacturing and selling Flex chassis and x86 nodes. I also imagine there is engineering / manufacturing agreements between the two that share R&D & costs as they jointly work to improve the platform for future models. With Lenovo agreeing to license existing IBM technologies like storage and software into their markets, IBM selling it's x86 business and thus the financial burden to Lenovo while still benefiting from the platform via Lenovo efficiencies this should make Lenovo more formidable against Dell and HP while strengthening IBM's balance sheet.

    The point is that the market for System x just grew from the IBM x86 sellers to the #1 global PC vendor's market. A few of those new customers will get introduced to IBM storage, software and hear the Power server story. The Flex technology is solid, Lenovo is a supply chain monster with huge global markets, IBM just shifted some of its cost to a partner while pocketing some cash it looks to me like they are crazy like a fox.

  11. ben_myers

    You called it right.

    Unlike other pundits who blabbed about Dell buying the IBM low-end server biz, the Inquirer got the prediction absolutely right, and exactly the way I saw it going. Dell buying IBM server biz had a snowball's chance in hell... Ben

  12. PeterM42
    Pint

    They couldn't make a worse job of servers

    I remember IBM servers where the performance was beaten hollow by cheap desktops.

    Perhaps Lenovo will do a better job. Have to say I am impressed with their S6000 tablet for the price.

  13. Randall Shimizu

    I am bit surprised that IBM is selling off the x86 Flex servers as well. Last year IBM indicated that they were not selling the Flex systems to Lenovo. IBM has been selling 300 flex servers a month.

  14. Anonymous Coward
    Anonymous Coward

    Big deal, IBM will still be the leader in Mainframe/business supercomputing, their software business is in a very good position also, and Gartner says they provide the best support for how many consecutive years now.

    There is also their POWER systems business, which is probably the only long-term viable RISC enterprise architecture, and sales there are actually pretty good thanks to the Oracle vs. HP war, not to mention the fact that I do not think that either SPARC or ITANIUM have much of a future, and the OSes that run on them, eeew.

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