Is IBM Selling Its Server Business To Lenovo?

 

The industry is abuzz with speculation that IBM will sell its x86 server business to Lenovo. As usual, neither party is talking publicly, but at this point I’d give it a better than even chance, since usually these kind of rumors tend to be based on leaks of real discussions as opposed to being completely delusional fantasies. Usually.

So the obvious question then becomes “Huh?”, or, slightly more eloquently stated, “Why would they do something like that?”. Aside from the possibility that this might all be fantasy, two explanations come to mind:

1. IBM is crazy.

2. IBM is not crazy.

Of the two explanations, I’ll have to lean toward the latter, although we might be dealing with a bit of the “Hey, I’m the new CEO and I’m going to do something really dramatic today” syndrome. IBM sold its PC business to Lenovo to the tune of popular disbelief and dire predictions, and it's doing very well today because it transferred its investments and focus to higher margin business, like servers and services. Lenovo makes low-end servers today that it bootstrapped with IBM licensed technology, and IBM is finding it very hard to compete with Lenovo and other low-cost providers. Maybe the margins on its commodity server business have sunk below some critical internal benchmark for return on investment, and it believes that it can get a better return on its money elsewhere.

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IBM Makes Major Commitment to Flash

 

Wisdom from the Past

In his 1956 dystopian sci-fi novel “The City and the Stars”, Arthur C. Clarke puts forth the fundamental design tenet for making eternal machines, “A machine shall have no moving parts”. To someone from the 1950s current computers would appear to come close to that ideal – the CPUs and memory perform silent magic and can, with some ingenuity, be passively cooled, and invisible electronic signals carry information in and out of them to networks and … oops, to rotating disks, still with us after more than five decades[i]. But, as we all know, salvation has appeared on the horizon in the form of solid-state storage, so called flash storage (actually an idea of several decades standing as well, just not affordable until recently).

The initial substitution of flash for conventional storage yields immediate gratification in the form of lower power, maybe lower cost if used effectively, and higher performance, but the ripple effect benefits of flash can be even more pervasive. However, the implementation of the major architectural changes engendered across the whole IT stack by the use of flash is a difficult conceptual challenge for users and largely addressed only piecemeal by most vendors. Enter IBM and its Flashahead initiative.

What is Happening?

On Friday, April 11, IBM announced a major initiative, to the tune of a spending commitment of $1B, to accelerate the use of flash technology by means of three major programs:

·        Fundamental flash R&D

·        New storage products built on flash-only memory technology

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