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Dell Rumored to be a Possible Buyer for IBM’s x86 Server Division

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IBM had come close to selling its low-end server business last year to Lenovo, but now Dell is among the parties rumored to be a possible buyer for its x86 server division, according a Wall Street Journal report that cites unnamed sources familiar with the matter.

The x86 server category has been facing difficulty recently given new developments that use existing hardware more efficiently, companies like Google assembling their own hardware, and new, non-x86 devices stealing market share. And instead of buying a server to run applications, many consumers are likely to instead buy Software-as-a-Service applications hosted by a third-party provider.

According to the WSJ report, a spring 2013 deal with Lenovo fell through because of a disagreement on pricing. The business unit, according to Morgan Stanley estimates, generated about a third of its total server sales revenue in 2012 ($15.4 billion).

Dell, which has the third largest server revenue after IBM and HP, appears to be interested in buying IBM’s x86 server division, where it could take advantage of economies of scale in this low-margin sector as the company shifts its focus more towards corporate clients.

Of course, moving away from low-end servers could be in-line with IBM’s direction towards software and services, especially around cloud computing. Last week, IBM announced a $1.2-billion plan to expand its cloud services data center footprint by 15 new data centers by the end of the year. This will add to the 13 SoftLayer global data centers it has from the SoftLayer acquisition in 2013 and IBM’s own 12 data centers.

IBM has declined to comment on any rumors or speculation around a possible deal with Dell or any other possible buyer.

About the Author

David Hamilton is a Toronto-based technology journalist who has written for the National Post and other news outlets. He has covered the hosting industry internationally for the Web Host Industry Review with particular attention to innovative hosting solutions and the issues facing the industry. David is a graduate of Queen’s University and the Humber College School of Media Studies.

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