Lenovo-IBM server talks reach impasse

Lenovo, the world's second-largest personal computer supplier, is holding firm on getting "a reasonable price" after reaching an impasse in negotiations to buy part of the server business of International Business Machines, sources say.

"The talks haven't broken down, but there is a gap in the valuation [of the target business] between the buyer and the seller," a person familiar with the discussions said.

The proposed deal covers the IBM division that makes and sells commodity x86-standard servers, which are the low-cost, general-purpose corporate computers used to run business applications and which serve as the basic hardware inside data centres.

News of the potential acquisition emerged last month, with some reports speculating that the transaction could be worth around US$5 billion.

But Lenovo aims to secure "a reasonable price", which would be about a third of what IBM had asked for during the negotiations, another source said.

Alberto Moel, a senior analyst at Bernstein Research, said if the two parties broke their deadlock over price, the deal would be Lenovo's biggest acquisition since it bought IBM's personal computer division for US$1.75 billion in 2005.