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IBM will outsource its server manufacture after sealing a joint venture deal with China Great Wall Computer Corporation.
The agreement will create a new company, International Systems Technology (IST), of which 80 per cent will be owned by IBM and 20 per cent by China Great Wall.
The joint venture will initially produce IBM's eServer xSeries, but is also expected to produce the forthcoming OpenPower Linux-only server.
Further reading
IST replaces a previous partnership between the two firms, called International Information Technology Company, which produced PCs and servers.
It will be based in South China's Guangdong province and will have an export factory in the Futian Bonded Area of Shenzhen.
With the sell-off of IBM's PC division to Lenovo, the latest deal confirms China Great Wall's position with IBM.
Brian Gammage, vice-president at analyst Gartner, told CRN: "It makes sense. IBM is no longer making the PC products, and the organisation of its server production needed to be restructured."
Lu Ming, president of China Great Wall, and IBM vice-president Tim Carroll shook hands on the deal last week.
James Governor, principal analyst at RedMonk, said: "IBM server decisions are made separately from its other divisions, but a 2007 timeframe for selling its server section doesn't seem out of the question.
"IBM makes billions of dollars from selling hardware. Palmisano [IBM's chief executive] has to sell less Intel and Microsoft, and more Linux kit. In the coming years IBM will make a retreat from third-party OEM suppliers."
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