This is not the first relationship between the two companies. In 2005, Lenovo bought IBM's ThinkPad business for $1.75 billion.
The sale, which still requires US government approval, reportedly would increase Lenovo's market share in the server market from 2 to 1 percent.
The deal is for the lower-end server business, which produces low-cost x86 servers. IBM will still maintain is higher-end server system. Reports are that IBM will keep developing software and applications for the x86 platform, as the company continues to focus on software, apps, and similar business.