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Lenovo's IBM server deal mimics multi-market growth strategy used by Samsung and others

Matt Hamblen | Jan. 24, 2014
Lenovo's deal to buy IBM's x86 server business for $2.3 billion gives the Beijing company another tech segment where it can expand beyond PCs, smartphones, tablets and smart TVs.

The emerging landscape for some of the largest Asian tech companies is about enlarging control of their computer component supply chain in nearby cities to boost profits. It's something few U.S. and Canadian companies are doing profitably, said Jack Gold, an analyst at J. Gold Associates.

"Even Apple outsourced its supply chain to Foxconn," Gold said. "BlackBerry is doing the same thing. IBM did that with PCs and now with servers. The Far East supplier network can control the entire components supply and make their products closer to the component suppliers for a lower cost, which means high profits.

"You really can't make consumer-based products in local, country-specific factories anymore, as the economics of scale will kill you on profit marginsthat's the bigger lesson of Lenovo's move," he said.

Unlike Samsung, Lenovo is unlikely to expand to make washers and dryers, Gold said.

 

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