Lenovo reportedly close to acquiring IBM's x86 server unit

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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