Lenovo announces purchase of IBM division

China's Lenovo, the world's largest personal computer vendor by shipment, Thursday announced an acquisition of International Business Machines Corp (IBM)'s low-end server unit for $2.3 billion, in a move to further diversify beyond the PC market.

A filling posted by the company on the Hong Kong Stock Exchange Thursday said that the acquisition has received approval from the Committee on Foreign Investment in the US. It halted Thursday's trading due to the announcement of this deal.

Early in May 2013, media reports said Lenovo had already expressed its intention to buy IBM's X86 server division for $2.5 billion, but the two failed to reach a deal because IBM had expected to offer the unit for sale for between $4 billion and $6 billion.

IBM is in great need of money to address its cash flow problem, and the price offered by Lenovo this time was fairly reasonable, Zhang Yi, CEO of Shenzhen-based Internet research firm iiMedia Research, told the Global Times Thursday.

The US company reported a loss of $26.4 million after taxation in the financial year ending December 31, 2013, according to the filing.

However, Zhang said that Lenovo can hardly gain high profits from the sales of X86 servers in this increasingly mature sector, but the purchase of IBM's X86 server unit would significantly boost Lenovo's market share.

Lenovo has already dipped a toe in the server market several years ago, and this deal will lift the company to third place currently in the worldwide server market with a market share of 14 percent by worldwide server shipments, a PR representative of Lenovo told the Global Times Thursday. It bought IBM's Thinkpad PC unit in 2005 for $1.75 billion, which helped it top the worldwide PC market.

Zhang at iiMedia Research believed Lenovo considers the acquisition as a springboard to leap into the more promising high-end server market.

According to Gartner, Lenovo ranked seventh with a market share of 2.3 percent by worldwide server shipments in the third quarter of 2013, while HP topped the market with 26.9 percent and IBM was in third with 7.9 percent.