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Lenovo to finish $2.1bn IBM x86 server gobble in October

A lighter snack than expected – but what's a few $100m between friends, eh?

Lenovo will finally get to close the deal on IBM’s x86 server division on 1 October – after slicing a few hundred million off the price tag.

The Chinese tech firm will finish the acquisition with a closing purchase price of $2.1bn, which is a little lower than the original $2.3bn price tag because of a change in the valuation of Big Blue’s server inventory and deferred revenue liability, Lenovo said.

The company will hand over around $1.8bn in cash and the rest in stock for a slice of an old faithful in the tech world that it will be hoping can open some doors to international customers.

“With the close of the x86 acquisition, Lenovo will add a world-class business that extends our capabilities in enterprise hardware and services, immediately making us a strong number three in the global server market,” said Yang Yuanqing, chairman and CEO of Lenovo, in a canned statement.

“Now, our priorities are to ensure a smooth integration and deliver a seamless transition for customers. By combining Lenovo’s global reach, efficiency and operational excellence with IBM’s legendary quality, innovation and service, I am confident that we will have competitive advantages to help us drive profitable growth and build Lenovo into a global enterprise leader.”

Lenovo has form when it comes to spending its way into markets. The company already acquired IBM’s PC business back in 2005 and is in the midst of acquiring Motorola Mobility’s smartphone business from Google, a move that will make it the world’s third largest smartmobe-maker as well.

There was some concern at one point that Lenovo’s offer for IBM servers wouldn’t pass muster, given the current US attitude towards Chinese tech firms. The United States and China have been at loggerheads over cybersecurity, accusing each other of corporate espionage and general spying and their suspicions have led to deals between companies from the two countries getting delayed or even scrapped.

The US Treasury Department’s Committee on Foreign Investment in the US, which looks at the national security implications of business deals, was looking into the Lenovo acquisition and reports suggested it was worried about giving China a boost in high-performance computing and concerned that Lenovo could give Chinese spooks access to IBM servers. However, the committee okayed the deal last month.

As part of the server biz deal, Lenovo will also partner up with Big Blue on storage and software, becoming a reseller of IBM products including Storwize, LTO, Smart Cloud and Platform Computing. ®


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