IBM will shed its low-margin, low-end server business for $2.3 billion after greater than a year of on-again, off-again negotiations with Lenovo.

IBM announced Thursday that Lenovo has agreed to purchase IBM’s x86 server business for $2.3 billion. The deal gets IBM out of a low-margin business where revenue declined 16% last year.

The business Lenovo is acquiring includes System x, BladeCenter, Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking, and upkeep operations. IBM had hopes of marketing the x86 business last year, but widely reported negotiations with Lenovo broke down, and IBM announced in May it will not realize what it hoped probably a $5 billion divestiture.

IBM will continue to develop its Windows and Linux software portfolio for the x86 platform. It’ll also continue to sell several systems according to x86 processors through its PureApplication and PureData appliances, high-margin products that still include IBM software.

[Want more on IBM’s hardware-related moves? Read IBM Plans Layoffs, New Investments.]

“IBM is a number one developer of software products for x86 servers with thousands of goods and tens of thousands of software developer and services professionals who build software for x86 systems,” IBM said in an announcement.

IBM said the 2 companies will enter right into a strategic relationship, in an effort to include a world OEM and reseller agreement for sales of IBM’s entry-level and midrange Storwize disk storage systems, tape storage systems, General Parallel File System software, SmartCloud Entry offering, and IBM system software including Systems Director and Platform Computing solutions. 

Once the deal is closed, Lenovo will take over customer support and upkeep operations for the x86 business, though IBM said it’ll continue to give maintenance delivery on Lenovo’s behalf for “a longer amount of time.” Approximately 7,500 IBM employees in locations including Raleigh, N.C., Shanghai and Shenzhen, China, and Taipei, Taiwan, are expected to be offered jobs with Lenovo. 

The take care of Lenovo comes nearly 10 years after Lenovo agreed to buy IBM’s PC business in 2005. Yet again it is a case of IBM shifting out of a commodity business so it could actually specialize in high-margin, high-value businesses. The company cited its just-announced $1.2 billion investment in its SoftLayer cloud business and its recent $1 billion investment to construct a Watson cognitive computing business as cases in point.

Doug Henschen is executive editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data, and analytics. He previously served as editor-in-chief of Intelligent Enterprise, editor-in-chief of Transform magazine, and executive editor at DM News.

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