Lenovo Buys IBM Server Business for $2.3B

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Jan. 23 (Bloomberg) –- IDC’s Crawford Del Prete and Bloomberg’s Cristina Alesci discuss Lenovo’s purchase of IBM’s server business and what this means for China’s booming tech industry. They speak to Cory Johnson on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

You about the lenovo deal and trying to make changes in the regulator opinion about whether they will want to allow this business to be sold to china?

The deal was announced but the next big hurdle is obviously going to the committee on foreign investments in the u.s. and getting clearance from regulators on this review.

Anything that raises questions about china's government's involvement in technology and internet areas is going to highlight the fact that the government is very much involved.

It could create a little bit of a hiccup for them, but let's keep a couple of things in mind.

At the end of the day, ibm and lenovo will say that this is not critical technology that they are dealing with.

Very much a commodity, in a sense.

You are surprised at the low price for this deal because nobody really wants this business.

They will argue that this is not critical technology.

The other thing is that lenovo and ibm went to this process, when ibm sold them the pc business and they were improved with conditions attached.

There were some things that lenovo had to give up in that deal to get that review.

Let's not forget, the u.s. wants foreign investment.

They want china to come -- the current administration has been asking chinese companies to come in and create more opportunities to invest.

Those are the things working in favor of signing off on the deal, but this current outage does raise more headlines and questions about china's involvement.

When you talk about the price for this deal, i wonder, it really does suggest that there were a not -- not a lot of other bidders.

Hewlett-packard is about 4.5 times the sales, this unit went for about five times the sales.

This deal had been talked about for a while, all of these technology companies, these older technology companies, are struggling with the idea that they have to get out of hardware and become software.

Did you just call me older?

I said you are no better, you are wiser.

This is emblematic of what every single old-line hardware company, i was actually referring to old technology, not your age.

Ibm is going through this process, when they really need to go through this process.

Ibm has saved itself from death a couple of times here.

They are trying to reinvent themselves again so it is critical that they shed this.

Investors are not valuing going deeper into software and services where the potential growth may be.

Lenovo, this does not do much in increasing their margins but at the end of the day lenovo needs to grow, two.

I saw signs from the lenovo president -- and crawford is going back into this.

Given the news about the internet outage, and the great firewall of china, the company that looms large to me is the battle between sysco --the company that is probably the -- background of that firewall of china.

Does wawo loom in the approval of the steal?

They would definitely except the consideration approval of the deal but at the end of the day, i think this is good news for dell and hewlett-packard.

In addition to other entry-level server manufacturers, the bottom line is that the -- this probably includes government business in the united states going to somewhere else.

And when you get through that, lenovo ins up in a way to grow and i disagree a little bit because it can be added to that margin, i think that when you are on the square on the board where lenovo is, even when you net out the government district, lenovo wins.

They get a license to manufacture and they get to move up the ladder in terms of customer profile and margin.

Crawford, you bring up a good point.

This is actually a customer of the ibm server business.

They are raising some concerns but what i am hearing is that the department of defense has a great firewall when it comes to this and they will not be able, even if this is under control of a chinese company at the end of the day, there will be massive firewalls.

That would not allow any kind of hackers or snoopers to get to the source codes so that would not really be an issue.

I agree with you, they may lose the department of defense business going forward.

I would tend to agree.

With that, crawford del prete

This text has been automatically generated. It may not be 100% accurate.

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