Is IBM (NYSE: IBM) getting ready to do a “deja vu all over again” deal with Lenovo, selling its x86 server business unit to the world’s No. 2 PC maker which wants to sell more servers?

Where’s there smoke, there’s a  … deal cooking? Could be.

Now The Wall Street Journal and Bloomberg are reporting a possible deal, just as Computer Reseller News first reported Thursday.

The two companies have danced before with Lenovo buying IBM’s faltering PC business in 2005 – not long after IBM Chairman and CEO Sam Palmisano told IBMers (including that group’s employees) that PCs basically were a dead business. (“I was there when he said it,” a longtime IBMer now Lenovo exec told The Skinny.)

With global server sales growing and IBM still leading the market, while consider selling?

x86 Revenues Decline

Read this telling paragraph from research firm IDC’s latest server report from February (emphasis added):

“The x86 server market experienced sharp revenue growth in 4Q12 as systems based on Intel’s Sandy Bridge processor — which was launched in early 2012 — experienced strong demand which helped drive sharply higher average selling prices across the market. The x86 server market accelerated in 4Q12, increasing 6.0% in the quarter to $9.7 billion worldwide as unit shipments decreased 3.7% to 2.1 million servers. Despite the shipment decline, this is the highest quarterly revenue ever reported for x86 servers as the architecture accounted for 66.2% of all server spending.

“HP’s x86 factory revenue increased 4.4% and it continued to lead the market with 32.7% revenue share. Dell experienced 5.7% year-over-year growth in x86 server revenue and retained second place with 22.9% revenue share.

“IBM continues to hold third place with 16.7% x86 server revenue share following a 2.3% year-over-year decline in revenue.

“Cisco moved into the fourth position in the market with 5.0% revenue share as a result of 50.7% revenue growth when compared to 4Q11, while Fujitsu and Oracle tied* for fifth position with 3.1% and 2.7% share respectively. As a result of a strong demand throughout the year, worldwide x86 server revenue for 2012 increased 4.1% to $35.8 billion, while worldwide x86 unit shipments decreased 0.4% to 8.0 million units.”

Current Chairman and CEO Ginny Rometty is following in Palmisano’s footsteps. IBM’s growth strategy with the aim of driving up earnings continues to be: Get rid of people (especially in the U.S. and Europe where wages are much higher; a union in France reports that IBM is planning up to 1,400 job cuts there – 14 percent of the work force in that country) and dispense with hardware (such as the Raleigh-based point of sale group sold to Toshiba last year), PCs, printers – you name it – as the company has been doing for years.

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So far, IBM isn’t saying anything, including Chief Financial Officer Mark Loughridge, who was asked about it during IBM’s earnings conference call Thursday.

“I also wanted to sneak in another and ask, there are some speculation that you might sell the x86 server business on the tape and maybe you mentioned divestitures in your prepared remarks, just wondering if you could elaborate on that and clarify what we’re hearing?” came the question during IBM’s conference call Thursday evening after first reports broke about the possible sale.

After responding to another part of the analyst’s question, Loughridge then added: “[O]n speculation and rumors I’m obviously not going to comment on rumors …”

When contacted by WRALTechWire on Thursday, Lenovo and IBM representatives had similar responses:

“As usual, we do not comment on rumors or speculations in the market,” said Lenovo media spokesperson Milanka Muecke.

Added Doug Shelton of IBM: “By policy IBM does not comment on rumor or speculation regarding acquisitions or divestitures.”

(By the way, this has a Triangle connection: IBM maintains an x86 facility at its RTP campus.)

Computer Reseller News, a widely ready PC and tech industry publication,first reported that IBM is in active negotiations to sell its x86 brand of servers to Lenovo in a deal that could cost up to $6 billion.

Just Part of x86 on Block?

But IBM, which is the biggest server seller according to research firm IDC, may choose to sell off only some of the x86 business.

Dan Olds, principal analyst at Gabriel Consulting, told CompuerWorld that he doesn’t believe IBM would sell off all the x86 businesses.

“I can certainly see them getting out of the commodity tower server market, and commodity one- and two-way rackmount servers, but I don’t see them getting out of x86 blades or more specialized systems like iDataPlex,” Olds said.

Analysts made similar comments to Bloomberg.

Alberto Moel, an analyst at Sanford C Bernstein & Co. in Hong Kong.
“Low-cost servers are the fastest-growing, most attractive area of the server business right now, so this would make sense,” Alberto Moel of Sanford C Bernstein in Hong Kong said. “This is consistent with Lenovo’s strategy of moving into things that are growing and going new places.”

Laurence Balter, an analyst at Oracle Investment Research in Fox Island, Washington, also pointed out that server x86 chips are similar to the processors used in PCs and noted lagging sales.

“It’s underperforming because of the cost of doing business on IBM’s side,” he told Bloomberg. “Lenovo probably did the calculations and said, ‘Well, we can make more because IBM’s cost of doing business is so much higher.”

Lenovo is seeking to grow its server business as part of its PC-Plus diversification strategy.

A sale of some sort certainly wouldn’t surprise IBM workers.

“They’ve been getting rid of hardware for years,” said Lee Conrad, a spokesperson for Alliance@IBM that is seeking to represent IBM workers. He also says IBMers know something is cooking.

“What we have been told by members is that something is coming down with System X.”

[LENOVO ARCHIVE: Check out eight years of Lenovo stories as reported in WRAL Tech Wire.]

[IBM ARCHIVE: Check out more than a decade of IBM stories as reported in WRAL Tech Wire.]