Less than 24 hours ago (as I write this), IBM announced an agreement to sell its entire X86-based server business to Lenovo pending regulatory approvals. IBM will receive $2 billion in cash and $0.3 billion in Lenovo stock in the deal.
The deal, first rumored about 9 months ago, makes a great deal of sense for both companies and for customers as well. IBM has recently poured a great deal of investment into its X86 server line, including especially its PureFlex products, to create truly innovative X86 products. So IBM is divesting a technically superior set of products, much like the 2005 sale of IBM’s PC division (and its famous ThinkPad line) to Lenovo.
Lenovo, in turn, has been an excellent steward of IBM’s former PC division including the ThinkPads. Lenovo has steadily gained marketshare despite a tough competitive environment, and I expect that Lenovo will also be an excellent steward of IBM’s X86 servers going forward. Based on that track record it’s a great time to buy IBM X86 servers if you’re in the market. Lenovo is buying IBM’s X86 server unit to grow it, and that only happens if customers come first.
OK, so what does this news mean for zEnterprise mainframes? On the surface, not so much. That said, this news only reinforces long running market trends that have consistently favored the major part of IBM’s server strategy. Fundamentally IBM has a high value enterprise server strategy, one that focuses on intensely workload-optimized and service quality-optimized offerings with the most advanced technologies and capabilities. IBM is the only significant remaining high value enterprise server vendor, which is really quite astonishing. Sun, HP, and several other server vendors before them are, for all intents and purposes, defunct.
One might (briefly) question whether there’s a ongoing market for high-end servers. So far, and for the foreseeable future, the answer is an emphatic “Yes.” IBM is extremely happy with its zEnterprise business performance, and it should be. There are also strong industry trends that continue to favor high service quality, highly differentiated, workload-optimized computing, notably Big Data, analytics (particularly real-time and near real-time), secure clouds, mobile everywhere, and cognitive computing. The limitations of physics in microelectronics also will tend to favor IBM, its leading R&D, and its business models. More simply, there will be a market for the best, and if you’re the only one offering the best, that ought to be a very good business.
It’s important, though, that IBM not get complacent and that IBM always anticipate customer needs. This X86 server unit sale to Lenovo is at least somewhat positive in that respect, I would argue. It means IBM will, if anything, increase its focus on its core competencies, from its leading microprocessors (not someone else’s) all the way up through the complete business solution and the quality of that solution. Which reminds me of another successful technology company that has taken a similar approach in a completely different market segment: Apple.
By the way, I’m happy to be joining the Millennial Mainframer blogging team to share my thoughts and analysis, and to learn more about what you’re thinking and experiencing in the world of mainframe computing. After a brief hiatus and many years editing The Mainframe Blog, I like my new home here where it’s much easier to exchange ideas. If something’s on your mind, be sure to speak up.