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IBM to sell PC business?

IBM to sell PC business?

IBM could be poised to sell its iconic PC business, according to a story published last week by The New York Times.

The report from The New York Times says there are at least two potential buyers lined up, but the main focus has been on the Lenovo Group (formerly Legend Group), China’s largest PC maker.

London’s The Financial Times says Lenovo is expected to pay US$1.5 billion for IBM’s PC division including rights to the company’s “Think” brand. IBM is expected to retain a small stake in the business. However, the same paper goes on to say that IBM is also being courted by Wall Street buy-out specialists.

IBM is currently the world’s third-largest PC maker, behind Dell and Hewlett-Packard. Unlike its rivals, the company is more focused on business customers than consumers. In particular, the IBM Thinkpad range of notebooks enjoys a reputation for style, robustness and security.

If the reports are correct, it now appears the company that first set the PC ball rolling in 1981 now believes it can make more money selling software and services alongside larger computer systems.

This squares with analyst forecasts coming from companies such as IDC and Gartner. These indicate the next three years or so could be especially tough, even by PC industry standards. Growth is expected to slow or even halt, while competitive pressures will further erode already slim margins.

However, such conditions might suit Lenovo’s low manufacturing costs and huge home market. These strengths could give the Chinese company an important edge in an industry where Dell is the only consis-tently profitable major player. It will also shift the balance of power in the PC business away from the US and towards East Asia — which now accounts for the bulk of components inside most computers.

On one level, offloading some or all of its PC division makes sense for IBM. Since 1998, the majority of the company’s revenue and the bulk of its profits have derived from services and software rather than hardware. However, it’s ownership of a well-regarded PC brand helps emphasise IBM’s soup-to-nuts coverage of the IT spectrum.

IBM New Zealand was unable to comment on the story by the time Reseller News went to press.


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