IBM’s x86 Server Business
Chinese PC maker Lenovo, the top-ranked PC maker in the world, announced on January 24 that it made a decision to purchase part of IBM’s x86 server unit for US$2.3 billion. IBM is going to hand over all of its x86 server business except its mainframe, unix server, storage, and appliance units.
With Lenovo’s buyout, a power shift in the Korean x86 server market, which is currently dominated by the big three — HP, IBM, and Del, is likely.
Currently, the number one PC manufacturer is doing its server business mainly in the US, China and the EU, and making up nearly 4% of the Asia-Pacific market. The PC giant revealed its intention to occupy more than 10% of the global market within three years by absorbing IBM’s x86 server unit.
As a result, the competitive landscape for x86 servers is expected to change. Lenovo Korea anticipates that it will rather easily enter the local server market with this acquisition.
However, Lenovo’s successful absorption of IBM’s 20% share in the local market is being called into question, since the Made in China label can negatively affects its business in Korea. Moreover, it is uncertain whether or not all of IBM Korea’s sales personnel and distribution networks for its x86 server unit will be moved to Lenovo Korea after all.
An industry source said, “After the takeover, IBM Korea is likely to provide technical support for another year. But local customers still prefer the US server brands.” The source added, “IBM Korea’s 50 sales personnel are more likely to move to competitors such as HP, Dell, and Oracle, rather than go to Lenovo Korea.”
Furthermore, HP Korea and Dell Korea are expected to unleash more aggressive sales campaigns aimed at replacing IBM’s x86 server in a time of chaos in the market after IBM Korea’s exit. Therefore, the possibility of a power shift from the existing big three to only HP and Dell cannot be excluded.
The price war in the local x86 server market is also going to become more fierce. It is due to the fact that new entrants such as Lenovo and Huawei are more likely to adopt aggressive pricing strategies amid competitive pricing in the market. If that happens, competitors such as HP Korea and Dell Korea may also change their pricing strategies, ultimately leading to lowering market prices further.