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[video] IBM Inks $2.3B Server Deal With Lenovo

Stocks in this article: IBM

NEW YORK (TheStreet) - IBM (IBM) has signed a $2.3 billion deal with Lenovo which will see the Chinese tech giant acquire IBM's low-end server business.

Around $2 billion of the purchase price will be paid in cash, with the remainder paid in Lenovo stock. Lenovo shares trade in Hong Kong.

Lenovo will acquire IBM's servers based on Intel's (INTC) x86 chips, which includes its System x family of products, as well as its BladeCenter and Flex System blade servers and switches. IBM's x86-based Flex integrated systems, NeXtScale and iDataPlex products will also be sold to Lenovo.

IBM, however, will keep its higher-end System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances, according to a statement released before market open.

Around 7,500 IBM employees around the world are expected to be offered employment by Lenovo, according to the Armonk, N.Y.-based IBM. Neither company has indicated when the deal is expected to close.

IBM has a history of working with Lenovo. In 2005 it sold off its PC business to the Beijing, China-based firm.

Rumors have swirled recently that IBM was looking at a sale of its low-end server business with Lenovo and Dell touted as potential purchasers. The move marks the latest stage in the company's shift from low-margin hardware to higher-margin software and services.

"This divestiture allows IBM to focus on system and software innovations that bring new kinds of value to strategic areas of our business, such as cognitive computing, Big Data and cloud," said Steve Mills, senior vice president and group executive of IBM Software and Systems, in a statement. "IBM has a proven record of innovation and transformation, which has enabled us to create solutions that are highly valued by our clients."

IBM shares gained 0.07% to $182.38 before market open.

--Written by James Rogers in New York.

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