Lenovo buys IBM's xSeries x86 server business for $2.3B USD, what about EMC?
Once again Lenovo is new owner of some IBM computer technology, this time by acquiring the x86 (e.g. xSeries) server business unit from big blue. Today Lenovo announced its plan to acquire the IBM x86 server storage business unit for $2.3B USD.
Research Triangle Park, North Carolina, and Armonk, New York – January 23, 2014 Lenovo (HKSE: 992) (ADR: LNVGY) and IBM (NYSE: IBM) have entered into a definitive agreement in which Lenovo plans to acquire IBM’s x86 server business. This includes System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking and maintenance operations. The purchase price is approximately US$2.3 billion, approximately two billion of which will be paid in cash and the balance in Lenovo stock. IBM will retain its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances. |
If you recall (or didn't’t know) around a decade or so ago IBM also spun off its Laptop (e.g. Thinkpads) and workstation business unit to Lenovo after being one of the early PC players (I still have a model XT in my collection along with Mac SE and Newton).
What this means for IBM?
What this means is that IBM is selling off a portion of its systems technology group which is where the servers, storage and related hardware, software technologies report into. Note however that IBM is not selling off its entire server portfolio, only the x86 e.g. Intel/AMD based products that make up the xSeries as well as companion Blade and related systems. This means that IBM is retaining its Power based systems (and processors) that include the pSeries, iSeries and of course the zSeries mainframes in addition to the storage hardware/software portfolio.
However as part of this announcement, Lenovo is also licensing from IBM the Storwize/V7000 technology as well as Tape, GPFS based scale out file systems used in SONAS and related products that are part of solution bundles tied to the x86 business.
Again to be clear, IBM is not selling off (or at least at this time) Storwize, tape or other technology to Lenovo other than x86 server business. By server business, this means the technology, patents, people, processes, products, sales, marketing, manufacturing, R&D along with other entities that form the business unit, not all that different from when IBM divested the workstation/laptop aka PC business in the past.
What this means for Lenovo?
What Lenovo gets are an immediate (once the deal closes) expansion of their server portfolio including high-density systems for cloud, HPC as well as regular enterprise, not to mention also for SME and SMB. Lenovo also gets blade systems as well as converged systems (server, storage, networking, hardware, software) hence why IBM is also licensing some technology to Lenovo that it is not selling. Lenovo also gets the sales, marketing, design, support and other aspects to also expand their server business. By gaining the server business unit, Lenovo will now be in a place to take on Dell (who was also rumored to be in the market for the IBM servers), as well as HP, Oracle and other x86 system based suppliers.
What about EMC and Lenovo?
Yes, EMC, that storage company who is also a primary owner of VMware, as well as partner with Cisco and Intel in the VCE initiatives, not to mention who also entered into a partnership with Lenovo a year or so ago.
In case you forgot or didn't’t know, EMC after breaking up with Dell, entered into a partnership with Lenovo back in 2012.
This partnership and initiatives included developing servers that in turn EMC could use for their various storage and data appliances which continue to leverage x86 type technology. In addition, that agreement found the EMC Iomega brand transitioning over into the Lenovo line-up for both domestic North America, as well as international including the chinese market. Hence I have an older Iomega IX4 that says EMC, and a newer one that says EMC/Lenovo, also note that at CES a few weeks ago, some new Iomega products were announced.
In checking with Lenovo today, they indicated that it is business as usual and no changes with or to the EMC partnership.
Via email from Lenovo spokesperson today: A key piece to Lenovo's Enterprise strategy has always included strong partnerships. In fact today's announcements reinforce that strategy very clearly. Given the new scale, footprint and Enterprise credibility that this server acquisition affords Lenovo, we see great opportunity in offering complimentary storage offerings to new and existing customers. Lenovo's partnership with EMC is multifaceted and stays in-tact as an important part of Lenovo's overall strategy to offer customers compelling solutions built on world-class technology. Lenovo will continue to offer Lenovo/EMC NAS products from our joint venture as well as resell EMC stand-alone storage platforms. IBM Storwize storage and other products are integral to the in-scope platforms and solutions we acquired. In order to ensure continuity of business and the best customer experience we will partner with IBM for storage products as well. We believe this is a great opportunity for all three companies, but most importantly these partnerships are in place and will remain healthy for the benefit for our customers. |
Hence it is my opinion that for now it is business as usual, the IBM x8x business unit has a new home, those people will be getting new email addresses and business cards similar to how some of their associates did when the PC group was sold off a few years ago.
Otoh, there may also be new products that might become opportunities to be placed into he Lenovo EMC partnership, however that is just my speculation at this time. Likewise while there will be some groups within Lenovo focused on selling the converged Lenovo solutions coming from IBM that may in fact compete with EMC (among others) in some scenarios, that should be no more and hopefully less than what IBM has with their server groups at times competing with themselves.
What does this mean for Cisco, Dell, HP and others?
For Cisco, instead of competing with one of their OEMs (e.g. IBM) for networking equipment (note IBM also owns some of its own networking), the server competition shifts to Lenovo who is also a Cisco partner (its called coopitition), and perhaps business as usual in many areas. For Dell, in the mid-market space, things could get interesting and the Round Rock folks need to get creative and beyond VRTX.
For HP, this is where IMHO it's going to get really interesting as Lenovo gets things transitioned. Near-term, HP could have a disruptive upper hand, however longer-term, HP has to get their A-Game on. Oracle is in the game as are a bunch of others from Fujitsu to SuperMicro to outside of North America and in particular china there is also Huawei. Back to EMC and VCE, while I expect the Cisco partnership to stay, I also see a wild card where EMC can leverage their Lenovo partnership into more markets, while Cisco continues to move into storage and other adjacent areas (e.g. more coopitition).
What this means now and going forward?
Thus this is as much about enterprise, SME, SMB as it is HPC, cloud and high-density where the game is about volume. Likewise there is also the convergence or data infrastructure angle combing server, storage, networking hardware, software and services.
One of the things I have noticed about Lenovo as a customer using ThinkPads for over 13 years now (not the same one) is that while they are affordable, instead of simply cutting cost and quality, they seem to have found ways to remove cost which is different then simply cutting to go cheap.
Case in point about a year and a half ago I dropped my iPhone on my Lenovo X1 keyboard that is back-lit and broke a key. Calling Lenovo after trying to find a replacement key on the web, they said no worries and next morning a new keyboard for the laptop was on my doorstep by 10:30Am with instructions on how to remove the old, put in the new, and do the RMA, no questions asked (read more about this here).
The reason I mention that story about my X1 laptop is that it ties to what I'm curious and watching with their soon to be expanded new server business.
Will they go in and simply look to reduce cost by making cuts from design to manufacturing to part quality, service and support, or, find ways to remove complexity and cost while providing more value?
Now I wonder whose technology will join my HP and Dell systems to fill some empty rack space in the not so distant future to support growth?
Time will tell, congratulations to Lenovo and the IBMers who now have a new home best wishes.
Ok, nuff said
Cheers gs