As sharks circle, IBM prepares its x86 exit

Once IBM completes the sale of its x86 server line to Lenovo, the latter will immediately take a solid third place ranking in worldwide revenues in that market.

Today, according to IDC data, Hewlett-Packard leads with 29.6% of the revenue generated in the worldwide x86 server market. Dell is No. 2, with 22%, and IBM in third, with 11%. Lenovo’s market share is currently in the single digits.

IBM said Friday that the U.S. Committee on Foreign Investment had cleared the $2.3 billion sale of its x86 business to Beijing-based Lenovo. The purchase agreement was announced early this year, and the global transition has been underway since then.

What’s left are formalities.

IBM’s website states that “System x is now a Lenovo product.” The parties could close this deal in the U.S. as early as this month.

This move affects about 7,500 IBM employees worldwide; IBM has said they would be offered jobs with Lenovo. Adalio Sanchez, the general manager of IBM’s System x line, which includes its blades, is expected to continue in that post with Lenovo.

Meanwhile, Lenovo-IBM rivals are trying to lure away IBM x86 customers. In an apparent appeal to IBM users who may be experiencing a bit of fear, uncertainty and doubt (or FUD) because of the pending deal, Hewlett-Packard has a headline on its home page that says, “Server vendor planning its exit strategy? Drive your business forward with the right kind of partner.”

For its part, Dell has launched a campaign that includes offering an online course for its partners on the “competitive talking points that may help you take advantage of this opportunity and drive more Dell server sales.”

“There is always an opportunity, and there is always a threat for both sides,” said Jed Scaramella, an analyst at IDC. IBM rivals, he says, “view [the Lenovo deal] correctly as a short-term opportunity to grab some customers.”

But Scaramella points out that Lenovo bought IBM’s entire business unit and IDC “thought was a really good move.” Top managers, including Sanchez, as well as employees in sales, development and marketing, are moving to Lenovo as part of an effort by Lenovo and IBM to keep the operations as consistent as possible, he said.

“They are picking not just the technology, but they are picking up the staff as well,” said Scaramella. The goal, he explained, “is to make the transition seamless for all IBM System x customers.”

The other key aspect of the deal is that the business unit is landing with a company that cares about hardware, said Scaramella, noting that IBM “has been moving upstream” from hardware, focusing more on software, services and cloud, he said.

The prior connections between the two companies will ease the transition, said Charles King, an analyst at Pund-IT.

When Lenovo purchased IBM’s PC division in 2005, there were concerns that the Chinese company would fumble and hurt the ThinkPad PC line, but “the contrary has actually been the case,” said King. Lenovo has become the largest global seller of PCs in terms of shipments.