Lenovo has walked away from IBM takeover discussions, as both companies clash over the valuation of IBM's X86 server business.

Citing unidentified sources, Fortune magazine says the multibillion-dollar deal is now off the table, with the Chinese PC maker allegedly dismissing IBM's US$6 billion proposal.

The news follows strong reports last month that Lenovo was considering an acquisition of the X86 server business, with the world’s second-largest PC manufacturer even releasing a statement to the Hong Kong stock exchange dismissing the claims.

“As at the date of this announcement, no material terms concerning the potential acquisition have been agreed," a Lenovo read.

Yet the denial wasn't enough to prevent rumours escalating, with China Daily newspaper reported the companies were in 'preliminary negotiations' over a possible deal.

Reuters says IBM declined to comment on the news, while Lenovo admitted it was in early talks about a potential acquisition but refused to name the firm.

Despite the set-back however, negotiations could still resume, following in the footsteps of Lenovo's purchase of IBM's PC division in late 2004.

Can a deal be struck? Is US$6 billion too big a valuation? Tell us your thoughts below