IBM has announced the sale of Big Blue’s x86 server division to Chinese manufacturer Lenovo, thus terminating IBM’s long-running relationship (and one-time rivalry) with Intel and freeing the company to further focus on it softwares divisions. The deal only covers IBM’s x86 server business; the company will retain control of its own Power-based servers and hardware (which still make a boat load of cash). Its research and development arm should be unaffected.
It’s only been a year since IBM was posting record gains in sever market share, but those gains have been obliterated by significant drop-offs in x86 server revenue. According to IBM’s Q4 transcript, revenue fell $750M in Q4 from hardware sales, and $1.7B year on year. Not all that decline is attributed to x86 — System z sales were hit as well — but it’s a hard hit for the company.
Thus, IBM is doing in servers what it did years ago in desktops and laptops — getting out, rather than attempting to compete on margins. This chart is from last September, but it shows the stark contrast between the non-x86 server market (where IBM dominates) and the x86 market, where it’s a niche player.
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