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IBM to sell its PC business
5 December, 2004
by Alan Thwaits
IBM, the company that introduced the first commercially viable
personal computer in 1981, is putting its PC business up for
sale, according to a story published on the Web site of the
New York Times.
According to the Times article, Big Blue is in discussions
with the Lenovo Group Ltd., China's largest maker of personal
computers, and at least one other potential buyer. The Times
did not divulge the price of the sale or the current status
of the negotiations, though it did say that the sale is likely
to be in the $1 billion (U.S.) to $2 billion (U.S.) range
and is expected to include IBM's entire range of desktop,
laptop, and notebook computers. IBM and Lenovo spokespersons
have declined to comment on the announcement.
If the sale of IBM's PC business is, in fact, in play, it
will mark the Armonk, N.Y.-based vendor's final retreat from
the personal computer market, in which has long trailed leaders
Dell and HP. Having lost its lead in the PC space, IBM has,
in recent years, concentrated on the corporate server and
computer services business segments, markets that are less
heavily commoditized than the PC space.
"PCs are really a commodity space, and IBM has mentioned
more than once in the past few years that it wanted to move
away from that space, and focus more on services and software,"
said Michelle Warren, an analyst with Evans Research. "IBM
made PCs available because their customers wanted them, but
they were never the company's main focus. The PC was, for
IBM, a tool to make business happen."
According to a recent Evans Research study, the PC business
represented approximately 10 per cent of IBM's annual revenue
of $92 billion (U.S.). In the last quarter, however, IBM ranked
only third in worldwide PC sales, well behind Dell and HP.
If IBM does go ahead with the sale of its PC business, it
will both signal the continuation of a trend to move high-technology
manufacturing to China and Taiwan, and also support a recent
prediction by report from research firm Gartner that three
of the top ten PC vendors will exit the PC market by 2007,
leading to further consolidation of the market.
The Gartner report suggested that changes among the top PC
players would be based on slower growth rates, reduced profit
margins, and replacement cycles. Gartner expects that, between
2003 and 2005, PC unit growth will increase by 11.3 per cent
annually, but will only grow 5.7 per cent between 2006 and
2008.
Evans Research's Michelle Warren doesn't expect that the
IBM sale - if it goes through - will change the bottom line
number in the PC space.
"This will not change the number of PCs sold worldwide
- it will just mean different labels on those PCs. Large numbers
of PCs are already made in China and Taiwan," she said.
"Where the disappearance of the IBM name might be felt
most is around its ThinkPad line. IBM's made a heavy investment
in its mobile product line, and has an extremely strong brand
name there. Dell doesn't have that kind of brand presence
in the mobile space. A sale by IBM would create huge opportunity
for vendors like Toshiba, Fujitsu, and Acer to pick that up."
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