After 31 quarters of exceptional performance, IBM finally hit a bump in the road when posting lowered profit and revenue targets by 1 and 5 percent respectively.  But pundits believe that IBM can recover from this especially with its new found focus in cloud computing and a rumored deal with Lenovo once again.

In 2004, IBM sold its PC business to Lenovo and the deal has worked out well for both parties.  Now, there’s a rumor going around that involved IBM selling its x86 boxes to Lenovo, but details are sparse.  Nevertheless, if this rumor is true this could be bad for IBM.

“There is a huge groundship taking place in computing that’s going to take place in the next 5 to 10 years,” Wikibon CTO and co-founder David Floyer said.  “Strategically, with the previous deal, IBM said, “Okay, if we’re not in the PC business, by way of our partnership with Lenovo, we will do okay.  Our services not part of that will not suffer that much.” And they were right.

“However, it’s very very different with how computing is going.  Sure, they’re going to the cloud and be cloud providers, but one of the most important decisions they made is to invest $1 billion in Flash.  The point about Flash is that storage is gonna move from the storager race, where IBM is still competing, towards the server and the key of that is having new architectures within the server that will take advantage of Flash being very very close to that server and making clustered systems.  If you give away your core competence, the x86 and the ability to design those systems Lenovo you’re going into that emerging market place with one hand tied behind your back.  I think that strategically will be a big mistake for IBM.”

Still, the two companies would benefit from the deal, but IBM will probably be enjoying a short-term success if this deal pulls through.

For more of Floyer’s Breaking Analysis, check out the full segment with Kristin Feledy below.