As virtualization and cloud hosting is becoming the new PaaS in the near future if not already, this has attracted many companies including IBM meaning fewer “boxes” needed and using less space. So it is of no surprise that a company such as IBM has less of a need for the low-end dedicated server market taking up space and providing little financial profit.
Lenovo thinks it can lower the current costs of IBM’s low dedicated server operating costs which will certainly help with low profit margins. As China’s server market is already crowded, expanding outside of the country is an obvious choice for Lenovo and as they have a good footing in China, it will most certainly be a good launch pad to start from with their new low end dedicated server business.
The other big advantage Lenovo will have is that because of it’s shear size, it will be able to tackle the issue of what is strongly needed in the low end server market to make a decent profit, which is large volume to drive sales and earnings.
However, current trends have indicated that the PC market is continuing to decline most notably due to smartphone sales and the ever increasing popularity of tablets from Apple and Samsung as well as several other major manufacturers.
It could certainly be seen as a good thing for the consumer or server buyer that Lenovo is soon to be competing with the big players such as Dell (http://www.hostinganddesigns.com/
Lenovo has done this purchase before with IBM’s PC business and seemed to work out smoothly as it also took over contracts and services provided via IBM, not just hardware. IDG News Services reported Lenovo spending $2.3 billion on the IBM x86 server business and has attracted the interest of the Committee on Foreign Investment in the U.S. (as large foreign purchases usually do). Due to recent events it may cause security concerns for the U.S. government. Even though Lenovo purchased IBM’s PC line in 2005, the Snowden leaks could make things more complicated and uncertain. Once (and if) they give the stamp of approval it looks like Lenovo is ready for round two.