Palmisano: PC Biz Didn't Fit into IBM's On-Demand ModelBy Jeffrey Burt | Print
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In a memo to IBM's Personal Systems Group, CEO Sam Palmisano said the PC and on-demand businesses "are very different business and economic models, and they will diverge even further in the years ahead."In the end, IBM's PC business no longer meshed with the on-demand technology model the company has been molding for the past several years, according to Big Blue's top executive.
In a memo sent to the employees of IBM's Personal Systems Group, Chairman and CEO Sam Palmisano said the company's decision to sell its PC division to Lenovo Group Ltd. came down to IBM's business strategy and the rapidly changing technology environment.
"IBM is an innovation company," Palmisano said. "We are committed to being the premier IT solutions partner for enterprises of all sizes, in all industries. This business model requires that we continuously create intellectual capital and that we reinvent everything we doour technologies, products and services, our culture and our portfolio of businesses.
In the new joint venture, China-based Lenovo will buy IBM's Personal Computing Divisionwhich includes its popular ThinkPad notebooks, ThinkCentre desktops and ThinkVantage technologiesfor about $1.75 billion. IBM will retain about an 18.9 percent interest in the new company, which will be the third largest PC vendor in the world, with have about $12 billion in annual revenue. It will be headquartered in Armonk, N.Y., and about 10,000 of the new entity's 19,000 employees will come from IBM. Stephen Ward, vice president and general manager for IBM's PSG, will become CEO of the new entity, which will be headquartered in Armonk. Current Lenovo CEO Yang Yuanqing will be president. More than half of the new company's employees will be from IBM.
IBM, also based in Armonk, will continue to sell, service, support and finance the products, and Lenovo will keep the brand names for at least five years.
The deal is expected to close in the second quarter of 2005.
Palmisano said the two companies' PC businesses were complementaryIBM focused on high-end and midrange enterprise users, while Lenovo targeted small businesses and consumers. At the same time, it will enable China to gain a foothold in the United States and grow IBM's footprint in China and Asia.
"By combining our personal computing division with its own, highly complementary business, Lenovo will be much better positioned to capture the opportunities in the PC industry," he said. "Lenovo is committed to investing in, growing and winning in PCs. Lenovo will be a formidable competitor, and our alliance gives IBM an even stronger position in China, while strengthening our brand presence there."
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