IBM Deal Will Enable Lenovo to Expand Worldwide Market Presence

Short Description
On 24 January 2008, IBM announced that it will extend its business relationship with Lenovo through a licensing agreement regarding the manufacture, branding and sales of single- and dual-socket x86-based System X Servers. The license will include options for the end-user to useA IBM financing, maintenance and ServerProven options. The deal does not include IBM’s blade servers, BladeCenter, four-socket and above servers, or IBM’s X-architecture.

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IBM’s agreement to license server technology to Lenovo differs markedly from its agreement to transition its PC business. In the latter example, IBM exited the market. But IBM plans to remain in the server market and continue to offer its complete portfolio of x86-based systems; it will, in fact, compete with Lenovo for sales of single- and dual-socket x86 servers.
The agreement gives IBM indirect access to a volume sales channel once again, enabling it to gain licensing, support and service revenue from Lenovo and its customers. Lenovo, in turn, gets access to IBM’s single-socket and dual-socket server technology, which will likely expand its traction in the server market. Lenovo will manufacture these systems and will market them worldwide, except in China. According to Gartner’s data, in 2007, Lenovo had a unit volume share of 0.5% while IBM was the third-largest x86 vendor with a 13% share.
Not covered by this agreement are IBM server management technology (IBM Director), BladeCenter technology and x86 servers larger than dual-socket. By retaining its differentiation with BladeCenter and its larger System X systems, IBM will still be able to compete effectively worldwide (and in China) in the mid- to high-end segment of the x86 market.
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