Tech giant IBM has inked a licensing agreement with Lenovo that will see the Chinese computer vendor making and selling a range of x86 servers.

The two firms are currently keeping quiet about the finer details of the deal, but it's a move that demonstrates Lenovo's wish to flex its muscles in the server market as well as extend its reach among small to medium-sized business (SMB) customers.

And, perhaps even more significantly, it's a decision that will spark speculation that it signals IBM's further retreat from hardware manufacturing in favour of services and solutions. At the moment, however, Big Blue insists that's not what's going on.

Under the new deal the Chinese computer maker – which is currently ranked fourth behind rival Acer on worldwide shipments – will build one-processor and-two processor servers based on IBM's System x server technology.

A Lenovo spokesman told The Register that the agreement did not mean IBM was exiting the market. He said that "we are not buying IBM System x because it is clearly not for sale".

In fact, Lenovo thinks that the strategy will see IBM deepen its technology footprint in the x86 server market.

Echoing that sentiment, IBM modular systems manager Rich Hume said in a separate statement that Lenovo would help the tech multinational increase its SMB market share.

He said: "We chose to partner with Lenovo since they bought our PC business. We will go in the same direction with the x86 server business. The intent is to engage in a part of the business where we currently don't participate."

IBM said that it will continue to make and sell its own similar IBM-branded servers using the same technology, and that it will support Lenovo's server sales with financing, maintenance and service contracts.

UK IT distie Interface is among the many firms hopeful to benefit from the new deal, with products expected to hit the channel in either the third or fourth quarter of 2008.

Interface's sales director Rob Tomlin told El Reg that IBM and Lenovo had "played a blinder" by deciding to combine forces and focus efforts on the tasty SMB server market.

He said that Interface had already reaped the benefits from the sale of IBM notebooks and PCs to Lenovo thanks to its "slick supply chain", and claimed that "sales doubled" following the takeover.

"You've got to hope they'll do the same in SMBs with the x86 market," he added. ®