Dell, Fujitsu and Lenovo to fight over IBM's low-end server business

By Graeme Burton
22 Jan 2014 View Comments
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Dell, Fujitsu and Lenovo are all lining up as potential bidders for IBM's ailing low-end server business.

The rumours that IBM is looking to off-load the unit - which first surfaced almost a year ago - follow disappointing fourth quarter and full year 2013 results, unveiled yesterday. They revealed hardware sales down by one-quarter, with profitability almost entirely melting away.

Further reading

Although sales of System X - the IBM branding for its x86 server business - fell by "only" 16 per cent, compared to 37 per cent for System Z mainframe and 31 per cent for Power Systems running AIX Unix, the System X business operates on much slimmer margins and is, in any case, a largely commodity business.

Just two days ago, Reuters reported that IBM had re-opened talks with Lenovo over a potential sale, while today the Wall Street Journal reports that Fujitsu is also in the frame. Dell has also been named as a potential suitor, although the company is also weighed down with the debts incurred in going private - estimated at just under $20bn. 

Talks last year with Lenovo reportedly stalled after the Beijing based company failed to meet IBM's $2.5bn asking price. 

In recent years, IBM has maintained its overall profitability by rigorous cost-cutting and selling off struggling hardware units, most notably its PC business, which it sold to Lenovo in 2005. Although cost cuts have helped to improve profitability, revenues have remained largely moribund since 2008.

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