Lenovo: at your servers - FT.com Given that so much of the modern world stares into a screen for most of the day, it is seems surprising that the global computer market is shrinking. But it is, and PC makers are scrambling for a plan B. Shares in Lenovo gained 9 per cent on Friday when the Chinese company, which bought IBM's PC business back in 2005, said it was in negotiations with a third party about an acquisition. It is thought this could be IBM's server division, but both companies declined to comment. An interest in servers makes sense for Lenovo. In August last year it partnered with the US storage server group EMC. True, Lenovo's PC business is doing OK versus peers - it was the only top-five maker not to record a drop in PC shipments last quarter. But it remains a struggling market that overall fell by a sixth in the same period. As a result, the company needs new areas of growth. Emerging markets and smartphones have so far been a big driver of this. IBM has just over one-third of the server market by sales. The market for servers that use x86 chips, where IBM is focused, is growing at 3 per cent (the rest of the server market is shrinking slightly) as customers shift to servers suited to cloud computing, IDC notes. If Lenovo can do in the server market what it has done with PCs - take share from Dell and HP by focusing on growing low-margin volume - it is on to a winner. Following the partnership with EMC, servers still make up about 2 per cent of Lenovo's revenues. Bernstein estimates that IBM's x86 server business generates annual revenues of about $5bn - a sixth of Lenovo's $30bn total annual sales. Even if Lenovo focuses on low-end servers, buying into this area would still boost its margins overnight. The Chinese PC maker's 12 per cent gross margins are half those of HP. Even the most basic servers command gross margins of 13 per cent and those among IBM's x86 server business could be in the 20-22 per cent range, Bernstein adds. Cracking into servers without a big acquisition would be no easy feat for Lenovo - HP and Dell still command two-fifths of revenues. But US dominance in a challenging market did little to temper the Chinese PC maker's ambitions last time around.