IBM resurrects plans to sell low-end server business

IBM resurrects plans to sell low-end server business

Summary: IBM is resuming attempts to sell its low-end server business after a deal fell flat last year.

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TOPICS: IBM, Hardware, Servers
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IBM hasn't given up on the idea of selling its low-end server business, and may be exploring additional routes that would provide a sale.

Big Blue and Lenovo held talks last year over a potential deal to handover the part of IBM's business that deals with low-end servers -- not a particularly high profit driver, but still a technology with a place in the corporate world. The sale of the x86 server business reached intense levels, but eventually broke down due to arguments over a sale price.

Despite the setback, according to the Wall Street Journal, people close to the matter say other parties are considering the business acquisition. The publication says that Dell is one such option, although it is not known how seriously the option to buy the x86 server business is being taken.

It is also unknown if Chinese firm Lenovo is still interested in the acquisition.

According to IDC, in Q3 2013, worldwide server revenues dipped by 3.7 percent to $12.1 billion. In total, 2.3 million units were shipped worldwide with Hewlett-Packard in the lead, stealing back the top position from IBM, which experienced an estimated revenue drop of 19.4 percent.

While IBM does not reveal how much revenue its x86 server unit business generates, Morgan Stanley estimates that the business generated roughly $4.9 billion in 2012. However, as technology advances, cloud computing has resulted in fewer server sales.

Last week, IBM revealed an investment of $1.2 billion in to the expansion of data centers focused on cloud technologies worldwide. The firm said it will build an additional 15 centers, bringing the total count to 40 by the end of 2014. IBM says that cloud-based corporate services could be a market worth up to $200 billion by 2020, and the expansion is required to stay competitive in the face of growing client demand.

Topics: IBM, Hardware, Servers

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  • Not every tech trend is overall beneficial

    "While IBM does not reveal how much revenue its x86 server unit business generates, Morgan Stanley estimates that the business generated roughly $4.9 billion in 2012. However, as technology advances, cloud computing has resulted in fewer server sales."

    I don't understand how Intel and server manufacturers are just surrendering to the public cloud, when doing so will to lead to a contraction of their businesses. Also, there is no way the public cloud is going make up for the losses. Fewer customers for servers is going to lead to less innovation in server technology, driving less sales. Also cloud vendors are going to do all they can to squeeze as much power out of servers, without the need for upgrades, in order to be super efficient. What is happening is analogous to people stop driving cars to take buses, trains, and other forms of public transportation. In such a scenario, the transportation industry would experience a significant net contraction in revenue. From an economic and technological point of view, the displacement by the public cloud is a significant step back for server computing.

    Not every technological development that comes down the pike is beneficial, and should be embraced. The wide scale embracement of public cloud computing is one of them. The industry should have fought for private clouds first, instead.
    P. Douglas
    • most companies are doing private clouds however...

      The effect is the same... fewer physical servers and more virtual servers.
      greywolf7