IBM's PC Unit Sale: Looking for Answers

By David Coursey  |  Posted 2004-12-08 Email Print this article Print
 
 
 
 
 
 
 

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Opinion: IBM's sale of its PC division to Lenovo raises a lot of questions, most notably, what does it mean for customers, employees, the competition and the IBM brand name?

IBM's sale of its PC division to Lenovo may be a good deal for shareholders, but I don't see customers cheering.

Click here to read more about IBM's sale of its PC division to Lenovo.

In jettisoning the low-margin personal computer biz, IBM spruces up its balance sheet but also shows longtime customers they are as disposable as, well, a formerly mighty business unit.

Big Blue will own nearly 19 percent of Lenovo and about 10,000 IBMers will move to the Chinese company. Don't you just know they're feeling good today? How many American IBM employees ever imagined they'd end up employed by a Chinese company—even one that's moving its headquarters to New York?

Interesting factoid: IBM says more than 40 percent of the Lenovo transfers already work in China, while less than 25 percent are in the United States, according to published reports.

Lenovo's new CEO will be the former head of the IBM PC group. That's reassuring for as long as it lasts. But if history is a guide, at some point Lenovo will start chasing the IBM people off and economizing. If they're not careful, the Chinese managers could wring the soul from their new acquisition.

Dell and HP can be expected to do everything possible to scare IBM's PC customers. It may, however, be hard for companies who rely on Chinese manufacturing to differentiate themselves. We'll have to see how that works out.

IBM will doubtless make the case that nothing significant is going to change and the PC business will operate as it had before the sale. I doubt that's entirely what will happen, but it could play out that way. We just have to what and see how that works out too.

Is IBM's PC retreat good business? Click here to read more.

Since the talks first became public, I've received a number of messages from IBM PC customers, expressing their disbelief that they were being abandoned. Sure, China Inc. makes very nice computers, but customers liked the confidence that came with the IBM brand. And they didn't mind paying more to get reliability and features.

The ThinkPad notebook line has always been considered a solid corporate purchase, especially as other portable PC vendors suffered their ups and downs. Sure, notebooks became commodities, but ThinkPad owners are second only to Macintosh users in their missionary zeal. I'm sure there are people out there who don't like ThinkPads, I've just never run into any of them.

Next Page: What will happen to the IBM brand name?

It will be interesting to see what Lenovo does to the IBM brand name. Any perceived change in quality or level of innovation will work against IBM's total corporate image. As a cautionary note, AT&T was a respected company until it bought TCI, the much-hated cable TV company, and put its name on it without solving TCI's problems first. That wasn't all that cratered AT&T, but the brand suffered greatly as it was expanded to include products and services people didn't like.

There has been speculation that once its business is sold off, IBM will try to sell customers on a new generation of machines based on its PowerPC chips and some sort of Linux-y operating system.

If IBM really wants to follow this path, it might as well buy Apple's Macintosh business, whose hardware is a Unix variant running on PowerPC processors. That this might actually happen—IBM trading its PC business for Apple's Macintosh business—is too surreal to be taken seriously.

It seems most likely that IBM is out of the desktop and notebook business for good.

Check out analysts' take on whether Lenovo Group, China's biggest PC maker, is the right choice to take over IBM's PC business.

Something we may see as a result of this deal is a bit of public furor over China Inc. buying such a visible brand as the IBM PC. Many will remember the fear that existed 30 years ago when it seemed to some that Japan would end up owning everything American worth having. That didn't occur, of course, and the Japanese economic colossus sank into recession from which it still hasn't recovered.

Since the Japanese economic scare, the U.S. economy has become quite integrated with those of other nations, especially China. Americans are so used to buying Chinese goods that the Lenovo deal may go unnoticed. But for those who question the value of globalization, it's likely to set off some warning bells.

For more insights from David Coursey, check out his Weblog.

And China remains—at least theoretically—one of only a couple of nations that could still feel the wrath of the United States in an all-out war. Both Taiwan and Korea remain significant sources of tension in the region, and the United States has long-standing ties. For all its "economic miracle," China fundamentally remains a totalitarian, mostly third-world nation.

I wonder whether China would provoke its best customer, but fear an American president could have trouble standing up to such a huge trading partner.

Check out eWEEK.com's for the latest news in desktop and notebook computing.

 
 
 
 
One of technology's most recognized bylines, David Coursey is Special Correspondent for eWeek.com, where he writes a daily Blog (blog.ziffdavis.com/coursey) and twice-weekly column. He is also Editor/Publisher of the Technology Insights newsletter and President of DCC, Inc., a professional services and consulting firm.

Former Executive Editor of ZDNet AnchorDesk, Coursey has also been Executive Producer of a number of industry conferences, including DEMO, Showcase, and Digital Living Room. Coursey's columns have been quoted by both Bill Gates and Steve Jobs and he has appeared on ABC News Nightline, CNN, CBS News, and other broadcasts as an expert on computing and the Internet. He has also written for InfoWorld, USA Today, PC World, Computerworld, and a number of other publications. His Web site is www.coursey.com.
 
 
 
 
 
























 
 
 
 
 
 

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