Re:Lenovo Agrees to Buy IBM Server Business for $2.3 Billion
by mnglkhn2 on Thursday January 23, 2014 @09:22AM
(#7108275)
Revenue matters, but the valuation is driven by the amount of profit. Margin in the server business must be very low (5%) and hence the valuation is a multiple of profit and not revenue.
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Re:Lenovo Agrees to Buy IBM Server Business for $2.3 Billion
by johnward on Thursday January 23, 2014 @10:12AM
(#7108598)
I'm sure the profit margin is low for IBM but will be workable for lenovo, but startup valuations are based on rainbows and unicorns.
Re:Lenovo Agrees to Buy IBM Server Business for $2.3 Billion
by lsc on Thursday January 23, 2014 @10:55AM
(#7108899)
do you have a source for the 5% number? I mean, I agree that x86 servers are a low-margin business, but 5% is lower than I'd expect.
Re:Lenovo Agrees to Buy IBM Server Business for $2.3 Billion
by mnglkhn2 on Thursday January 23, 2014 @12:17PM
(#7109481)
I should have qualified that number right from the beginning as a back-of-the envelope estimation:
If we assume a 10x multiple to profit and a 5bn revenue, it results in 5.4% margin. If we just say it was a 8x multiple, then it is 6.75% It goes to 7.7% margin if we make the multiple to be 7x