The deal comes nearly ten years after IBM sold its PC division to the same company. That sale was big news at the time – IBM had defined the PC architecture, and hardly anybody had heard of the Chinese upstart.

It is a measure of how much the IT industry has changed, and how IBM’s role in it has diminished, that this latest deal comes as no surprise. IBM – indeed the US – doesn’t really do hardware anymore.

The deal includes IBM’s System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking and maintenance operations.

IBM will retain its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances.

“The agreement builds upon a longstanding collaboration that began in 2005 when Lenovo acquired IBM’s PC business, which included the ThinkPad line of PCs,” the two companies said in a statement. “In the period since the companies have continued to collaborate in many areas.”

IBM will continue to develop and evolve its Windows and Linux software portfolio for the x86 platform. Lenovo and IBM plan to enter into a strategic relationship which will include a global OEM and reseller agreement for sales of IBM’s entry and midrange Storwize disk storage systems, tape storage systems, General Parallel File System software, SmartCloud Entry offering, and elements of IBM’s system software portfolio, including Systems Director and Platform Computing products.

Following the closing of the transaction, Lenovo will assume related customer service and maintenance operations. IBM will continue to provide maintenance delivery on Lenovo’s behalf for an extended period of time, so customers should see little change in their maintenance support.

Approximately 7,500 IBM employees around the world, including those based at major locations such as Raleigh, Shanghai, Shenzhen and Taipei, will be offered employment by Lenovo.

This agreement follows recent announcements by IBM that it will invest more than US$1 billion in the new IBM Watson Group, and US$1.2 billion to expand its global cloud computing footprint to 40 data centres worldwide in 15 countries across five continents. It also comes just two days after IBM reported declining revenues, with only its software business doing well.

“This acquisition demonstrates our willingness to invest in businesses that can help fuel profitable growth and extend our PC Plus strategy,” said Yang Yuanqing, Lenovo’s CEO. “With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, we are confident that we can grow this business successfully for the long-term, just as we have done with our worldwide PC business.”

Lenovo and IBM are known to have held talks in the past about such a sale, but couldn’t agree on a price. Now they can.

How the mighty have fallen.