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Lenovo secures IBM’s x86 server business in cut-price deal

Lenovo finally closed its deal to buy IBM’s x86 server business and paid $200 million [£123 million] less than it was originally supposed to stump up in a deal that was ratified by the US last month.

Read more: Lenovo and IBM server deal gets Chinese regulatory approval

The firm still had to pay $2.1 billion [£1.29 billion] for the chunk of IBM, though that was down from the $2.3 billion [£1.41 billion] price that was announced back in January and is due to lower-than-projected inventories on the 1 October date that the deal goes through.

Lenovo’s deal to buy the unit was delayed due to a diplomatic row between the US and China that rumbled on earlier this year and resulted in the Committee on Foreign Investment in the US [CFIUS] having to conduct a review. The fear in the US was that servers in the country would be able to be accessed remotely by Chinese spies or hackers once the deal went through and it eventually approved the deal in August.

It makes Lenovo the third largest server vendor on the planet behind Hewlett Packard and Dell, however, the CEO Yang Yuanqing told the AP that it won’t stop there.

“After we stabilize the business, we will challenge the top two,” Yang said in a phone interview.

Yang added that the plan is for Lenovo, in the first year following the acquisition, to build it into an enterprise business worth $5 billion [£3.08 billion] with profit margins that beat its PC business.

Read more: Lenovo favours European smartphone battle over home grown fight

The CFIUS got involved once before when Lenovo bought IBM’s PC unit back in 2005 in another huge deal that was worth $1.25 billion [£770 million] and the firm’s acquisition of Motorola Mobility for $2.91 billion [£1.79 billion] is still pending.

Image Credit: Flickr (Keso S)