IBM Negotiating to Sell PC Biz
By Suzanne Deffree -- EDN, December 3, 2004
IBM may be looking for an out of the PC world.
Reports have surfaced that Big Blue – one of the key companies responsible for bringing personal computers mainstream – will soon be selling its PC business to Lenovo, China's largest PC maker, or other possible companies.
IBM would not comment on the possible sale, but an analyst close to the company said that this is moving forward.
"By basic profits, [IBM's PC business] doesn't hit [CEO] Palmisano's divisional targets of profitability. They are not number one or number two. By that formula, they have to look around for buyers," Richard Douherty, Envisioneering Group research director, told Electronic News.
A company in China -- where most PCs are built now and where ThinkPads are almost entirely made -- would be a key fit and could propel IBM's ThinkPad brand back into top-place competition, bucking against the current big dogs Dell and HP, which both face high overheads working with the country's manufacturers.
"Lenovo, doing this in their backyard, may allow the ThinkPads to be even more aggressively priced and within a year or so in North America, could drastically change the competitive landscape between Dell and HP. IBM could jump ahead with the cost advantages of Lenovo making them entirely," Douherty noted.
IBM's PC unit contributes about 12 percent of the company's total revenue. An exit move like this would likely fetch $1 billion to $2 billion, and would continue the company's strategy of focusing on the more profitable businesses of computer services and servers – a market IDC ranks IBM as tops in, with a near 32 percent share in factory revenue.
While IBM may be stepping away from its PC business, its ThinkPad brand is not expected to disappear.
"ThinkPads have been doing very well with customers who need to recover their data quickly and secure their data so that it can't be stolen by network or by physical grasp. Whatever happens between Lenovo and IBM, we know that hundreds of thousands of customers in North America are depending upon the ThinkPad for those security features," Douherty remarked.
Indeed, he believes that part of the final deal will call for an ongoing supply of ThinkPads to IBM for its customers, leaving them mostly unaffected.
Further, a sale is not expected to have a big affect on partners like Intel and Analog Devices that have technology in the ThinkPad line.
"We think they'll be fine and their volumes may actually go up," Douherty said.
E-News Editor Jessica Davis contributed to this article.
