Lenovo's IBM deal will help EMC expand its market, storage systems giant says

World's largest maker of storage systems says expansion will be boosted by deal through its partnership with the mainland computer giant

PUBLISHED : Tuesday, 04 March, 2014, 11:37am
UPDATED : Wednesday, 05 March, 2014, 4:59am

EMC, the world's largest maker of storage systems, says its international expansion plan will receive a shot in the arm when Lenovo completes its acquisition of International Business Machines' low-end server business.

"Lenovo is going to be stronger in data centres [following that acquisition], where we are already strong, so the combination works well," David Webster, EMC's president for the Asia-Pacific and Japan, told the South China Morning Post.

United States-based EMC and Lenovo, which has operations in more than 160 countries, established in 2012 a broad partnership in which Lenovo manufactures and resells EMC's networked storage systems in China and other markets.

Their partnership also includes a technology development programme designed to accelerate Lenovo's capabilities in producing so-called x86-standard servers, which are embedded in selected EMC storage systems.

Lenovo, however, was keen to have a bigger footprint in the server market and announced in January its purchase of IBM's struggling x86 server business for US$2.3 billion.

The deal would enable Lenovo, which is already the top global supplier of personal computers, to become the world's third-largest manufacturer of general-purpose enterprise servers.

Lenovo chairman and chief executive Yang Yuanqing said the deal would benefit the company's alliance with EMC, but he declined to elaborate.

Webster said Lenovo's bigger presence in the server market would allow it to "sell to customers who want to buy an x86 server and EMC storage together - that's really where the benefit occurs".

"EMC's relationship with Lenovo is going well. It is very important, because we have already started to develop this relationship in markets outside China," he said.

In a report, Bernstein Research senior analyst Alberto Moel said: "We think the turnaround of [IBM's low-end] server business is a relatively straightforward job for Lenovo."

Moel expects the deal to close in about six months, after all regulatory approvals are obtained.

That would be a positive development for EMC in light of increased investments being made by various organisations - especially in financial services, telecommunications and the public sector - in data centre infrastructure to store and manage information, Webster said.

Data centres are secure, temperature-controlled facilities equipped to house large-capacity servers and enterprise storage systems, with multiple power sources and high-bandwidth links to the internet.

Webster said EMC's partnership with Lenovo would allow both companies to meet "the natural buying patterns for customers who refresh their server and storage systems at the same time".

Citing data from technology research firm IDC, he said EMC led the enterprise storage market on the mainland, with a 19.6 per cent share in last year's third quarter.