More on the IBM x86 divestiture rationale

As usual, TPM is extensive, starting with:

IBM is selling off the System x business, presumably because it is not profitable, but also because it is something it can sell while at the same time getting approximately 7,500 employees off its payrolls. Lenovo’s Peter Hortensius, who is president of the Think Business Group that sells servers and storage into enterprise accounts, said that buying the IBM System x business accelerated its plan to become a dominant system supplier by about five years, and would actually boost Lenovo’s profits once the deal is done. After thinking about it for a bit, I reckoned that IBM can’t get economies of scale in manufacturing and, because it doesn’t have a PC business, it lost volume pricing leverage with Intel and Advanced Micro Devices the minute it sold off the PC business to Lenovo. This had to be apparent many years ago, and the wonder is what took so long. My guess? The advent of vanity-free, custom or homemade servers have taken about a quarter of the systems market, and there went the last remains of juicy profits for IBM, which, unlike Dell and HP, does not have a play here. Those cheap servers put margin pressure on everyone in the X86 server business.

Also, check out this brief overview from 451’s M&A team, including a list of past IBM divestitures.

More on the IBM x86 divestiture rationale

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s