Regulators Approve Lenovo’s Acquisition Of IBM Server Business

Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) (HKG:0992) bought International Business Machines Corp. (NYSE:IBM)’s personal computer unit in 2005 and has kept itself quite busy with additional acquisitions and initiatives in the years since including the $2.9 billion purchase of the Motorola Mobility smartphone interest from Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) earlier this year.

With the acceptance of the deal by both U.S. and European regulators, the deal for IBM’s low-end server business is now set to close on Wednesday and will see the rapid growth of Lenovo continue.

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“Our mobile business and our enterprise business will be growing even faster than our PC business,” said chairman Yang Yuanqing.

Big move in server manufacturing

Once the deal is completed, Lenovo will only trail Hewlett-Packard Company (NYSE:HPQ) and Dell Inc. (NASDAQ:DELL) as server manufacturers. Today, Lenovo is the ninth-largest maker of servers so the jump is quite substantial. Lenovo is headquartered in Beijing and the mouthful that is Research Triangle Park, North Carolina. Last year, the company surpassed Hewlett Packard as the world’s biggest PC manufacturer though that is a bit of a left-handed success given the shrinking market for PCs in lieu of increased use of tablets, smartphones and other mobile devices.

Despite the acquisition of the server business, Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) (HKG:0992) expects that mobile devices will become its core business in the near future. In the company’s most recent quarterly filings, Lenovo saw a 32% increase in smartphone, tablet and wireless devices year-over-year that boosted its quarterly profit to an all-time high with a 23% rise to $214 million.

What is Lenovo buying?

The IBM purchase involves System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and the necessary software, networking, and maintenance operations that each requires.

When Lenovo announced the deal, the company said that it was paying $2.3 billion for the acquisition though that figure was reduced given the valuation of International Business Machines Corp. (NYSE:IBM)’s inventory as well as deferred revenue. Outside of the sale price nothing else changed according to a statement from Lenovo.

Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) (HKG:0992) intends to keep the manager in charge of the x86 business, Adalio Sanchez, though his paychecks will now be signed by Lenovo.