Lenovo to buy IBM’s server biz in China’s biggest tech M&A

The sale of the low-end server operation — which still needs US government approval — will allow International Business Machines (IBM) to focus on its decade-long shift to more profitable software and services.

International Business Machines said earlier this month that it would spend more than $1.2 billion to build up to 15 data centers on five continents to expand its cloud services and reach new clients and markets.

The company also said it would invest more than $1 billion to establish a new business unit for Watson — the supercomputer system that beat humans on the TV quiz show “Jeopardy” — to offer the cloud services to businesses and consumers. Lenovo’s acquisition would lift its market share in the server market to 14 per cent from 2 per cent, said Peter Hortensius, senior vice-president at Lenovo and president of its Think Business Group.

The deal needs clearance from the Committee on Foreign Investment in the United States (CFIUS), which is charged with protecting US national security. Chinese companies faced the most scrutiny over their US acquisitions in 2012, according to a CFIUS report issued in December. Lenovo’s purchase of IBM’s notebook division faced similar scrutiny.