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IBM Businesses China Hardware

IBM In Talks To Sell x86 Server Business To Lenovo 202

FrankPoole writes "According to CRN, IBM is in serious negotiations to sell its low-end x86 server business to Lenovo, which is looking to grow its server revenue. If the deal goes though, it will be the second time in eight years that Big Blue has exited a major hardware business and sold the operation to Lenovo. IBM sold its PC business to Chinese computer maker in 2005."
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IBM In Talks To Sell x86 Server Business To Lenovo

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  • Lower overall revenues for higher profit margins? Smells like an MBA.
    • by Taco Cowboy ( 5327 ) on Friday April 19, 2013 @07:17PM (#43499395) Journal

      When IBM decides to throw away its garbage, Lenovo will come begging

      • by PolygamousRanchKid ( 1290638 ) on Friday April 19, 2013 @07:42PM (#43499607)

        Actually, think of it a being "Business Recycling." IBM is selling it, because it can no longer run it as a successful business. Lenovo is buying it because they believe they can.

        When large trash day comes around here at the ranch, there are always folks picking up stuff that I no longer need, but they think that they can do something useful with.

        • And considering the figures on Levovo last I saw them they are on to something as they seem to be able to do just fine with the lower profit margins that IBM scoffs at.

          Of course i believe this is part of a larger disease that is infecting the west and is really gonna bite us in the ass, I call it "iMoney or bust". What happens is a company will just throw away a successful business because it isn't making double digit profits like iToy and end up hurting the company in the long run. the best example of this right now is MSFT, as PCs are still selling hundreds of millions a year (or at least they were before Win 8 came out) and making billions but because they aren't making iMoney on them MSFT will happily burn that entire business rather than accept low margin high sales business is still good business.

          This is one thing I have to give the Asian companies a LOT of credit for, they realize that consistent single digit profits? Is still fucking PROFITS and are more than happy to gobble up businesses where they can make a solid 4%-10% profit whereas thanks to the stock market being badly distorted by speculators [youtube.com] here in the west a company that makes profits but not iMoney is punished by falling stock prices. This is why Dell wants to take it private, if you look at their stats they are actually back to making what they were before the 07 downturn yet because that ain't iMoney their stock still sucks.

          You watch Lenovo will buy it, make solid single digit profits with it quarter after quarter and use that money to better their business. that is fucking smart but sadly being smart in business is punished here in the west, either you make iMoney or you watch the stock burn. Ironic as even Apple isn't able to keep making iMoney, hence why they are still selling previous versions and came out with a cheaper 7 inch.

          • by swalve ( 1980968 )
            I'm sure IBM figures it isn't worth the effort. If they don't sell it off, they figure that Lenovo will start selling their own line of x86 servers, and then what? Who are they going to sell the business off to then? IBM isn't *that* stupid, they know there are other places where they can expend the same effort and make double digit profits.

            Also, markets can't be distorted very much by speculators. (In anything but the very short term.) They can skim off the middle if they are really good, but there i
            • Also, markets can't be distorted very much by speculators.

              Do you mean that AAPL is really worth more than Belgium?

          • by Clsid ( 564627 )

            I would mod parent post as extremely insightful. I'm currently living in China and here you realize how expensive our daily lives over there have become. I mean cities like Shanghai are still expensive to the Chinese, but for us it's so extremely cheap that it makes you realize the kind of profits some companies in the West are making. Like I can get a job teaching English here that will pay around 10,000 RMB and I pay 4500 RMB in rent for a fancy studio apartment. Now I have a friend who has a part-time ar

        • by swalve ( 1980968 )
          I agree. Why should IBM waste a bunch of money propping up a line of business that isn't really growing and is basically mature? Spend money, maybe make some of it back, still have to do something in another 5 years. Or, sell it to Lenovo and invest the cash in some new adventure of the future? Seems like an easy answer to me. Its much better than just letting it peter out and eventually having to mothball it. I like the idea of IBM as a sort of modern big time thinktank, making new ideas work and the
        • Actually, think of it a being "Business Recycling." IBM is selling it, because it can no longer run it as a successful business. Lenovo is buying it because they believe they can.

          When large trash day comes around here at the ranch, there are always folks picking up stuff that I no longer need, but they think that they can do something useful with.

          IBM makes its money from large corporations, in the form of consulting fees, ERP and database support, High performance hardware beyond 64bit addressing and more. They also feel that with cloud services, that small business marketplace does not match their corporate objectives. Cut staff, keep the cream, and let the PC stuff for others. IBM does not want to make pennies from this marketplace, they want to make dollars from a smaller employee population, and from employees who are in 3rd world countries

      • by Spy Handler ( 822350 ) on Friday April 19, 2013 @07:49PM (#43499651) Homepage Journal

        IBM PCs were hardly garbage when IBM sold it. The ThinkPad line was highly regarded and the business as a whole was doing ok. The profits were low and declining but that was due to the cutthroat competition and commoditization of PCs rather than anything majorly wrong with IBMs.

        Looks like Lenovo has done well since buying the Thinkpad line. They're the only PC maker with a pulse right now.

        • The most durable laptop I ever owned was a Lenovo Thinkpad. Took about 7 years of abuse being tossed around in my laptop bag. It got 2 cracks in the LCD bezel the last couple years I used it. Other than that, no problems.
          • The Thinkpads that IBM designed (hell a lot of things that IBM designed) were high water marks for the industry. Lenovo assembled them but they have not shown me that they, as a company, are anymore committed to producing such a high quality product now that they are responsible for the brand than are any of the other mainland shit companies.

            I turned to HP for a while, they had something worth buying for a bit, but I'm at a loss for my next round.

            I'm seeing a lot of shit right now. Kinda hoping that Mr Del

            • by Clsid ( 564627 )

              Don't know about that, to me Lenovo is among the best brands quality-wise in the PC world. That being said, it does not mean much since the PC market is full of crap in general. IBM computers were truly good in the 80s and 90s, but they couldn't keep up with the competition of the likes of Dell and Gateway.

              To this day, I like buying Apple hardware for that precise reason. Even if it is overpriced, it is one of the few companies that will make sure that you get a premium experience. That's why a lot of peopl

      • by rayzat ( 733303 ) on Friday April 19, 2013 @07:55PM (#43499687)
        One man's trash is another man's treasure. Selling off PC group was a huge win for both companies. IBM shed a low margin business, margins that were so low investing the money the put into PC group into t-bills would have yielded more profit. Lenovo had a leaner operating structure and different business options being a Chinese company that would let them run higher margin and they've made more then enough profit to pay off the acquisition several times over. IBM also got a nice revenue stream from licensing IP to Lenovo as well as the services for running Lenovo's first line support as well as coordinating their break fix.
      • Actually, what do they exactly mean by 'low-end x86 servers'? They have high ends as well? I'd have thought that x86 addresses all their low end server needs, and for the high end, they'd use POWER or Z-series or something like that. In fact, in China, I've noticed that there have been a couple of companies, like Huawei, that are making servers based on the Itanium - something that everybody but HP have abandoned.
        • by div_2n ( 525075 )

          Actually yes. The x series can be some large 4-way and higher x86 servers IBM sells that typically are used in heavy duty database clusters, large VM farms and high demand app servers. These servers can sell for over $100K depending on the config. And then there's Blade Centers series

          Low end x86 tends to be the 1U and 2U varieties that are targeted for one-off web servers, AD servers and such.

    • Sounds like exactly the reverse - I've seen MBAs push for higher revenues/marketshare even if it means making more losses. That's one thing that's never made much sense to me
      • by Clsid ( 564627 )

        That's Amazon business model. It makes perfect sense. Imagine you are operating like a non-profit. Everybody gets paid their usual salary and the company has millions coming in but it does not matter. Everything is to support the idea of dominating the market.

  • by Type44Q ( 1233630 ) on Friday April 19, 2013 @06:58PM (#43499267)
    The summary should probably also mention that IBM sold off their entire storage division to Hitachi...
    • They're focusing on teleportation now, I hope?
      • You want to rent a teleporter from them?

        You'll actually be renting 8 teleporters, but you only get to use one of them at a time if you're on the discount lease.

    • by PolygamousRanchKid ( 1290638 ) on Friday April 19, 2013 @07:25PM (#43499463)

      . . . and Networking Hardware Division to Cisco . . . and Federal Systems Division to Loral . . .

      Some companies start as small operations in people's garages.

      IBM holds garage sales.

      Although, it should be noted that they buy a lot of software businesses . . . like Lotus . . . Tivoli . . . Rational . . .

    • by Junta ( 36770 )

      Huh? When did this happen? Or do you mean the hard drive business, which is very much not the same as their Shark stuff (and of course the Ramsan, the SVC, and XIV stuff they bought and the various netapp things they rebadge)

      • Huh? When did this happen?

        After the "Deathstar" fiasco, when IBM realized they'd fucked-up so terribly badly that no informed consumer in their right mind would ever take their hard drives seriously again...

  • by Nerdfest ( 867930 ) on Friday April 19, 2013 @06:58PM (#43499269)

    Margins are pretty tight in that business. They'll do much better stcking to their mainframe business charging ridiculous prices for MIPS to customers that can't afford the cost of migrating.

    • companies like Samsung will wipe the data center market clean with new SOC blades in a few years... IBM know the writing is on the wall and they won't be able to compete

      • Re: (Score:3, Interesting)

        by rayzat ( 733303 )
        I asked some PMs from Intel who they thought the next big competition was and everyone thought Samsung had all the tech and talent to turn into a major adversary over the next couple years.
  • They've still got System Z mainframe line, and I can't see them selling that business unit off, but they ought to just drop the M and call themselves 'International Business'.
    • That line of business has a list of customers that make Apple fans look rational. They'll buy anything with IBM on it that the salesmen show them. They're set until the last of them retire or die off.

      • its got more to do with ecosystem dependence and huge vested interests than fanaticism... you just can't compare an iphone with a mainframe

        apple fans aren't as trapped into using apple products as some may think, whereas ibm customers pay millions of dollars to set up infrastructure with a lot of inertia that can't change course with each passing fad

        • In all of the 'IBM shops' I've worked in, it's quite close to fanatacism. If it says 'IBM' on it, it will go through purchasing without question. Software or hardware from a competing vendor that is an industry standard, cheaper, with better performance and more features requires massive justifications. It may also be the 'old boys network' of sales people as well.

          • by i ( 8254 )

            IBM sells on RAS, Reliability, Availability and Serviceability. ( http://en.wikipedia.org/wiki/Reliability,_availability_and_serviceability_(computer_hardware) [wikipedia.org] ).
            With the z Architecture you can e g replace (hotswap) CPU's without affecting running applications. Think of banking systems that must have 24/7/365 service.
            With z/OS you also need *much* less sysprogs and operators compared with equivalent sized number of PC (or unix) servers.

      • In the high end server market IBM is the last of the old-school giants. They have support that will pull parts out of their test machines and hand drive them to you if those big iron boxes break. Of course on big iron "break" means a board is dead.., the machine itself is usually still running, just slower. If you find a real software bug, you can end up with the programmer (or the guy who SITS next to him) for that code looking at your machine himself. You are THAT higher up on the food chain than you eoul

    • by ebno-10db ( 1459097 ) on Friday April 19, 2013 @07:17PM (#43499397)

      but they ought to just drop the M and call themselves 'International Business'.

      Correction: 'India Business'.

    • by Guy Harris ( 3803 ) <guy@alum.mit.edu> on Friday April 19, 2013 @07:25PM (#43499465)

      They've still got System Z mainframe line, and I can't see them selling that business unit off

      ...and they also still have the IBM Power Systems line [ibm.com] (Power Architecture boxes running IBM i, AIX, and Linux).

      • Revenue from power systems was down 32% compared to a year earlier. If they don't improve soon they'll get sold just like System X.
        • They don't have a major refresh every year, years with refreshes appear to have crazy year to year growth followed by a year of apparent sharp decrease. One 'bad' year is not unexpected if preceded or succeeded by a certain event on their roadmap.

    • I don't think Machine ever refered to ``machine'' as in computer or mechanical thing... it refered to IBM itself being a business machine.

      • It really did refer to machine. When Watson named the company International Business Machines it manufactured all sorts of machines. Actual, real machines. Punch card tabulators, clocks, scales and cheese slicers. During WWII they even made rifles. At one time, machines were the heart of IBM.
    • They have the POWER line as well, and that is also the guts in Watson's SuperComputers. They do make machines, but not the ones that we usually afford. They pretty much occupy the space that Cray used to.
  • by ickleberry ( 864871 ) <web@pineapple.vg> on Friday April 19, 2013 @07:05PM (#43499321) Homepage
    That's it, boys! Sell all that you own to the Chinese so you might have another decade of living the high life while doing nothing to earn it.

    All that Western civilisation collectively worked on in the past 200 or so years has been given away to the Chinese for peanuts so we can sit on our collective asses and do nothing for about 20-30 years. Do you think that China will be paying us royalties once they figure out how to make a Core i7 processor themselves? F**k no, experience should tell you better.
    • Re: (Score:2, Informative)

      I would mod you up if I could. Well said. And people wonder why the economy here is so fucked up and jobs are so god damn hard to come by. They all went to fucking China.

      • Re: (Score:2, Insightful)

        by Tablizer ( 95088 )

        We should tariff lopsided trading countries like non-plutocracies do. The "Adam Smith" models that suggest even lopsided trade is "good" only focus on general averages and ignore stability (bank/currency bubbles) and unequal distribution (richer rich & gutted middle).

      • by dryeo ( 100693 )

        Yea, well those Chinese are so stupid that they're happy with a 10% profit margin while paying their workers enough to buy their products. Just stupid when they could sell everything and make a killing in the stock market.

    • You sir are a genius! How could no one in any of those huge companies with thousands of attorneys and accountants come up with your idea? Please give me your contact information so I can warn them of their impending errors.

    • by Kjella ( 173770 )

      If they should sell out to China I don't know, but IBM should have gotten out of commodity hardware sometime around the PS/2 flop in the late 80s. They got out of the desktop business after their ass was handed to them by cheap clones. They ditched the storage unit after the infamous IBM "Deathstars". So they created the original IBM PC, the Model M keyboard and I guess the PS/2 port is the lone survivor of that line but who is really going to miss their IBM hardware? Yeah ThinkPad was built like a tank and

      • by Molochi ( 555357 )

        "Yeah ThinkPad was built like a tank and made to last twice as long at thrice the price but their performance/$ has been more than questionable for a very long time. IBM just isn't the right kind of company to be in that business."

        The problem is nobody wants to be in that business. That's going to hurt everybody in the long run. Buying shitty products wastes far more money than it saves.

    • Ummmmm (Score:4, Insightful)

      by Sycraft-fu ( 314770 ) on Saturday April 20, 2013 @12:33AM (#43501515)

      IBM sold them a division that builds commodity hardware. You know, the same shit you can get from, Dell, HP, Supermicro, ASUS, and so on. They just assemble tech bought form other companies. Now that isn't worthless, people buy a lot of servers, but it isn't something hard to figure out.

      They didn't sell their processor division, which doesn't make i7s anyhow, that's Intel.

      In terms of making their own i7, well ok, good luck. IP issues aside (they don't have an x86 or x64 license like AMD does) there's the whole thing that designing a processor is pretty hard. China decided they needed their own, home grown, processor, and by "home grown" they mean "used MIPS architecture because designing an architecture is hard." So they've thus far managed to produce a MIPS64 processor, that they don't fab (STMicro fabs it for them, they are European) that runs at 1GHz on a 65nm process.

      That might be impressive (well minus the using other people's architecture thing, and the fab thing) except that Intel is making 4GHz processors on a 22nm process right now, and has a 14nm fab that is getting ready for pre-production in Arizona (will be up fully next year).

      This idea you have that the US does nothing, particularly nothing high tech, is badly misguided. You might want to do a bit more research and find out all the things it does do. Processors would be a big one, being that not only is Intel a US company but most of its fabs are in the US but it is hardly the only one.

      Not speaking to the business wisdom of IBM's move (IBM has been making bad decisions for awhile IMO) but stop acting like this is some super secret tech they sold. This is commodity manufacturing. For that matter it is commodity manufacturing that Lenovo already does some of. They make servers, just not many of them. This is an effort to grow their market quickly.

    • At least a quarter of my graduating class have moved to to SEA already, most to China, I moved to Malaysia. There is no future in the West :(
  • by FuzzNugget ( 2840687 ) on Friday April 19, 2013 @07:21PM (#43499437)

    If how Lenovo shat all over the ThinkPad line is any indication, you'll be sorry if you don't abandon ship now.

    • by msobkow ( 48369 )

      I don't know what they might have done to their ThinkPad line, but the IdeaPad I bought from Lenovo a few months back has proven to be rock solid, reliable, and fast. It runs on batteries longer than I need, and it has more bells and whistles than I want or need.

      Methinks people are just yearning for glory days that weren't as great as they remember in the first place, much like any other reminiscing people tend to do.

      • Yeah, who wants good build quality and keyboards that you can actually use for typing?
        • by msobkow ( 48369 )

          No parts have failed. Everything works. The keyboard is just fine. This crap about "good build quality" is just that -- crap.

          No, it doesn't have a brushed aluminum or forged titanium case. It doesn't have that little rubber nub instead of a trackpad (which I wish it did.)

          But there is nothing wrong with the "build quality" of the machine I bought. It's cheap. It has a plastic case. But I'm not planning to sit on it or drop it, so good enough.

        • by ajlitt ( 19055 )

          IBM hasn't built a good keyboard since 1991 when they spun off Lexmark.

          • by cusco ( 717999 )
            Oh, the clickety-clacks. The best possible way to change from a touch-typing on a typewriter to a computer keyboard. You could throw some of them in the dishwasher to get the Mountain Dew out.
            • by ajlitt ( 19055 )

              The later models had drains for funneling your coffee spit-takes out the bottom instead of in the mechanism or electronics. And of course they can also double as an impromptu assault weapon.

    • Yep.

      One thing I always admired about IBM Servers is that IBM would support the things practically forever as long as you kept a service contract on it. I highly doubt Lenovo will support a server for 10+ years.

  • last I heard anyone doing real (read: not sales) work was being outsourced to whatever country was cheapest at the time. Why would I bother hiring IBM to do that when I can do it myself?
    • Why would I bother hiring IBM to do that when I can do it myself?

      I think more (former) IBM customers are starting to figure that out. Here's an interesting story about IBM losing the contracts for Hilton Hotels and ServiceMaster due to bad service [cringely.com]. The ServiceMaster one is particularly interesting. Despite the incredible shortage of good IT people, which necessitates tripling the H-1B quota, they had a job fair one Saturday and were able to hire everybody they needed for their new in-house IT operation. I'd bet they saved money on it too. So the offshoring that IBM does

      • by bored ( 40072 )

        CE's don't even carry proper toolkits anymore. All the FRU's come with whatever tools are required to replace them, and larger items shipped by IBM come with wrenches and tools necessary for install. So the customers end up with a tool and supply pile if the CE comes often. And its not just screwdrivers and sockets. Its hard hats, klein cable fishes, and tons of single use tools like 3" wrenches, etc. Each with a specific purpose, but replacing a common tool like a crescent wrench with some stamped steel si

  • The article should read the low end of the x86 business. IBM has already picked over the best parts of System X and moved them into PureSystems and has also started co-designing x86 server hardware with Hitachi for PureSystems. So they are going to be focusing on integrated server, networking, and storage plays instead of just plain standalone servers. Really trying to mimic the success EMC and NetApp have had partnering with Cisco and their UCS platform.
  • ...will no longer sell any business machines. Interesting.

    • ...will no longer sell any business machines. Interesting.

      Someday that might be true, but, for now, they're selling these [ibm.com] and these [ibm.com] business machines.

    • they won't be selling commodity x86 server crap, you mean. they'll be selling their mainframes, supercomputers, i-series (the successor to AS/400 that can run system i, Linux and Windows), and system P (linux and AIX)

  • Being as the intellistations and some intelliservers were already done by lenovo, the deal won't be noticed by many.
  • Look, rometty would do well just to allow the Chinese gov. to buy them, rather than piece this out this way. They have nothing to replace it with, and they are giving away all of their IP.

    GE, HP, Sun, Dell, etc were once top notch companies ran by engineers or business ppl who actually care about their companies.
    Now, they are ran by MBA's that destroy the companies just so that they can get a fast buck.

    So sad.
  • by bored ( 40072 ) on Saturday April 20, 2013 @01:37AM (#43501755)

    That they sell to go with the servers? All three of those items are high margin and more than make up for the lack of margin on the servers themselves. How long is it going to take Lenovo to start selling enterprise storage or networking gear? They had better get some kind of agreement from lenovo that they won't sell gear in any of those categories for the next decade or two.

    I can't really see people calling up lenovo and ordering a bunch of servers, and then calling up IBM and ordering storage. If nothing else they are going to call up netapp, EMC and Snoracle as well.

    Maybe IBM doesn't care about the "low end" stuff people are connecting to their x86 servers. Sell a few less DS3500s milk the DS8k customers some more.

    The problem is that "low end" x86 hardware is slowly but surely eating into what remains of the unix/midrange "server" market. Sure a couple customers here and there buy a mainframe and run zlinux on a couple IFL's they basically get for free after buying the mainframe. But in the end, can they support a business on such a tiny portion of the market? Even major mainframe customers like American Airlines have publicly stated they are moving away from the mainframe.

    I suspect they will continue as they have for the last decade, selling pieces of the company, moving all the engineering to cheap labor countries, and charging their existing customers a heavy ransom for the privilege. But at this point in time IBM is beginning to look like Sun circa 2001.

  • IBM X-Series are fantastically well-built systems. I work with a lot of Fortune 100 companies and most datacenters have either HP or IBM for their tier-1 applications. The problem is that as apps become more stateless and more capable of tolerating downtime in different layers, the robustness, stability and even manageability of the server platform becomes less relevant. I think that's the reason why I'm starting to see a lot of low-end or even custom built 1U boxes and blades pop up in datacenters that oth

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