Lenovo, the world’s largest PC manufacturer ever since it passed Hewlett Packard for that distinction last year, is looking to purchase a low-end server from IBM. The purchase would help Lenovo to expand its efforts to diversify as the PC market continues to shrink. IBM is looking to unload the unit so they can concentrate their focus more away from hardware and more towards software and services.
The two computer giants are re-starting negotiations for the deal after they could not come to an agreement on valuation of the deal last year and talks fizzled. At the time of the first round of talks reports said that IBM was hoping to get between $4 billion and $6 billion for the server unit, but Lenovo, a China-based company, only offered $2.5 billion.
Today analysts estimate the server’s valuation to be between $2.5 billion to $3 billion. If the deal is concluded it will be the largest deal so far in the IT sector of China, even surpassing the buyout of 91 Wireless from NetDragon Websoft Inc by Baidu Inc for $1.85 billion last year.
“Everybody wins because even if IBM could double the profitability it’s still not good enough for IBM. On the other hand, Lenovo doubling the server business margins is a good deal for Lenovo,” said Alberto Moel, a Hong Kong-based analyst at Sanford C. Bernstein.