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China’s Lenovo Nears Deal To Buy IBM’s Server Unit: Sources

Lenovo Group Ltd is nearing an agreement to buy International Business Machines Corp’s low-end server business for $2-2.5 billion, a deal that would help the Chinese company counter the shrinking personal computers market, people familiar with the matter said.China's Lenovo

The timing of the deal was uncertain, with one of the people saying an announcement could come as early as Thursday. The final price could be close the bottom end of the range, the person said.

Lenovo, the world’s biggest PC maker, halted trading in its shares pending an announcement in respect of a transaction.

The potential deal comes after IBM missed revenue expectations for the fourth consecutive quarter when it reported earnings earlier this week.

A deal for IBM’s x86 servers, which power corporate data centers, fits with Lenovo’s attempts to remold itself as a force in mobile devices and data storage servers. It also helps IBM’s shift away from hardware towards software and services.

Reuters had reported on Tuesday that Lenovo had resumed talks to buy the IBM’s lower-margin unit after failing to reach an agreement last year following differences on pricing.

Lenovo’s purchase of IBM’s Thinkpad PC business in 2005 for $1.75 billion became the springboard for its leap to the top of global PC maker rankings.

Lenovo said earlier this week that it was in preliminary talks about an acquisition. It declined to name the seller but said it was making the statement in response to reports about its potential acquisition of a server business.

Recent reports have also indicated that Fujitsu Ltd and Dell Inc are also potentially interested in buying the server unit.

IBM declined to comment, while Lenovo was not available for immediate comment.

The timing of the deal was first reported by the Wall Street Journal, citing sources.

(Additional reporting by Denny Thomas and Paul Carsten; Reporting By Narottam Medhora and Nicola Leske; Editing by Ken Wills and Stephen Coates)

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