Following Lenovo’s US$2.3bn deal to acquire IBM’s x86 server business, many leading industry analysts have questioned how this will impact the channel market.
Speaking days after a definitive agreement was reached between the two companies, Giorgio Nebuloni, Research Manager, Servers, at IDC believes little will change for partners across the world.
"In a way, little will change for channel partners and customers, certainly in the medium term,” Nebuloni says.
“Probably even more than IBM, Lenovo is a channel-driven company, with virtually 100% of current server sales achieved through distribution.
“We recommend IBM partners and customers avoid disruption to day to day work with the vendor, while at the same time using this as a window to assess their longer-term strategy in terms of infrastructure consumption (on-premises, off-premises, managed, etc.) as well as supplier framework.
“However, as the buyout is far from complete and in particular U.S. regulators could pose hurdles, IDC advises against any rushed moves in any direction.”
Why did IBM sell off its x86 business?
Nebuloni believes IBM has not been able to build the scale in the x86 business that would make it a market leading contender.
Additionally, as confirmed in recent statements of intention, and with SoftLayer's acquisition last year, Nebuloni claims IBM believes it can and should address most of the infrastructure needs of its customers with IaaS cloud services, competing with vendors like Rackspace, Amazon Web Service and Microsoft.
“On top of this, we estimate gross margins in the x86 area are in the 15%–25% range typically — and depend strongly on operational efficiency and volumes — versus 40%–50% in legacy higher-end servers and 70%+ in software, where IBM will continue to play,” Nebuloni adds.
“Even IaaS services itself — despite the widespread assumption of low profitability — might be more profitable for IBM."
Who could gain most from the deal?
On paper, Nebuloni is confident the deal fits with the broader strategy of both vendors, Lenovo on its path to diversify from the core PC business and into richer product areas and IBM on its move to become a cloud provider first.
“The interesting bit will be related to how the companies will manage the transition for the richer x86 blade environments, which in some areas have replaced legacy UNIX platforms as the building block for core enterprise applications,” he adds.
“IBM will retain only the Power-based portion of blade environments, yet this will require a long-term joint work with Lenovo in several customers currently using both x86 blades and Power or System z mainframe environments or even storage blocks, which IBM will keep in its portfolio.
“We don't know the details of this switch, and as they say, the devil is in the detail.”
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