Lenovo reportedly close to acquiring IBM's x86 server unit

|About: Lenovo Group Ltd. ADR (LNVGY)|By:, SA News Editor

The WSJ reports Lenovo (LNVGY), once the buyer of IBM's PC unit, is now close to acquiring its x86 server ops. Sources state a deal could be announced as soon as tomorrow.

No word on price; "interested parties" not named Lenovo reportedly valued the unit at $2.5B when IBM shopped the business last year, but its recent performance might spell a lower price tag.

Big Blue reported yesterday its x86 server sales fell 16% Y/Y in Q4; that was actually better than the 26% drop reported for hardware/chip sales overall. The business has been pressured by fierce competition from H-P and Dell, and the use of white-label hardware by Web/cloud giants.

Selling the x86 unit would continue a long-term trend by IBM of unloading lower-margin hardware businesses in order to focus on software/services. It would also strengthen a balance sheet that has been dinged by huge buybacks and declining free cash flow (-18% Y/Y in 2013).

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