“China’s largest personal computer maker, Lenovo Group Ltd., said Wednesday it is buying control of IBM’s PC-making business for $1.25 billion, capping the U.S. tech giant’s gradual withdrawal from the business it helped pioneer in 1981. The agreement, which forms the world’s third largest PC business, calls for Lenovo to pay IBM $650 million in cash, $600 million in Lenovo Group common stock and for Lenovo to assume $500 million in net balance sheet liabilities from IBM. IBM will hold an 18.9 percent stake in Lenovo,” Reuters reports.
“Based on 2003 results, the companies will have annual revenue of $12 billion on sales of 11.9 million units, according to a news release,” Reuters reports. “The deal closes an era for the world’s largest computer company and kicks off a new age in which China’s top PC maker Lenovo steps onto the world stage as a major PC brand and IBM partner… Lenovo will take ownership of IBM ‘Think’ trademark family, including its ThinkPad notebook brand and its ThinkCenter desktop line.”
Full article here.
MacDailyNews Take: December 8, 2004. Apple Computer is still in the PC business. IBM isn’t. Whoda thunk it? On August 12, 1981, IBM released their first personal computer, the “IBM PC.” The “PC” stood for “personal computer” making IBM responsible for popularizing the term “PC.” The first IBM PC ran on a 4.77 MHz Intel 8088 microprocessor and came with 16 kilobytes of memory, expandable to 256k. The IBM PC came with one or two 160k floppy disk drives and ran a brand new 16-bit operating system from Microsoft called MS-DOS 1.0. The price tag started at $1,565, which would be nearly $4,000 today.
Who *WOULD” have thunk it? Are the Enderli’s of the world listening to this?
Hard to believe they felt it was time to sell out.
I’m looking forward to the day that Mikey Dell has to shut down his box farm and “give the money back to their shareholders.”
What about the G5 processor will this be in the deal also?
How much freedom does this give IBM to make and sell Unix and/or PowerPC box’s? Can they later get back into the personal market with this angle?
All this talk about IBM being responsible for the personal computing market I hear in the press is pure bull.
IBM asked Bill Gates in 1980 to develop a OS for their IBM 5150 computer. Which Bill couldn’t deliver (all he had was BASIC) so he bought the rights to hacked OS from Seattle Computer Products called “Quick and Dirty Operating System” or QDOS for short, which was changed to PC-DOS and later to MS-DOS!
http://www.old-computers.com/museum/computer.asp?st=1&c=274
And for a long time Windoze was a shell on top of DOS, so now you know why Windoze sucks so badly.
Now in 1976 Steve Jobs and Steve Wozniak formed the Apple Computer Company, on April Fool’s Day.
Also in July 1976 The Apple I computer board is sold in kit form, and delivered to stores by Steve Jobs and Steve Wozniak. Price: US$666.66.
(Clowns! both of them!)
By 1980, over 160,000 Apple personal computers were already sold!
By 1982, over 750,000 Apple personal computers have been sold.
So keep that in mind folks if you read IBM was somehow “responsible” for the creation of the personal computer in the missinformed “press” lately.
http://oldcomputers.net/lisa.html
first post from the article on one of the top 10 PC manufacturers bowing out:
TMAN
Who the hell is the “Lenovo Group”? What brand are they?
Indeed.
From: rlhamon
What about the G5 processor will this be in the deal also?
rlhamon no need to worry at all the G5 processors (PowerPC as far as IBM are concerned) have nothing to do with the PC product line. The IBM PC product line basically uses Intel chips, and runs Windows.
IBM’s chip business is in a seperate part of the business – thank God!
I think this is an extremely good move by IBM. Even though they were involved in the early days (if not the very begining) of the PC industry, does not mean that they have to stay in it forever.
As Theodore Levitt’s famous article Marketing Myopia points out, successful business know when to enter AND exit an industry. They also have to focus on what they actually provide their customers. As an example from Levitts’ Marketing Myopia article:
“The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because the need was filled by others (cars, trucks, airplanes, even telephones), but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry wrong was because they were railroad oriented instead of transportation-oriented; they were product-oriented
instead of customer-oriented.”
IBM (International Business Machines) is in the business of providing BUSINESS SOLUTIONS based on technology. The PC, when it was launched, was a revolutionary technological business solution, now a PC is as common as a stapler and photocopier (itself revolutionary at one time).
Xerox is not a photocopier company, it is a document and knowledge management solutions company.
IBM is focusing on providing technology solutions for customers businesses, it doesn’t need to make all the technology. High end servers, chip design, software solutions etc, are not as common as a stapler, and in these areas IBM expertise and knowledge still differentiates it from the likes of DELL – in a big way!
Another example is GE (General Electric).
Actually as I’m writing this the thought has occured to me that Apple’s iPod and “Digital Lifestyle” approach isn’t a totally differnt direction to what they set out to achieve all those years ago, as I am sure I’m not too off the mark in thinking their mission was to design technology products that make life easier and more enjoyable.
Just my thoughts.
Cheers,
Luke
And in other news today… A bitter cold front has spread all over hell and it is now officially frozen over….
IBM (International Business Machines) is in the business of providing BUSINESS SOLUTIONS based on technology. The PC, when it was launched, was a revolutionary technological business solution, now a PC is as common as a stapler and photocopier (itself revolutionary at one time).
Xerox is not a photocopier company, it is a document and knowledge management solutions company.
—
Sounds smart.. I like how you emphasize the vaguest terms so as to allow IBM some slack for turning its entire corporate culture on its head in the last 15 years (in a good way)… while making it look like they ‘meant’ things to turn out this way..
Xerox IS a photocopier company.. they don’t get to decide.. the customers decide…. jeez.. can you come up with a few more vague euphemisms please?
It’s not that IBM doesn’t need to provide the technology, it’s that the VALUE is no longer in hardware.. it’s services.. IBM never knew a damn thing about software.. when MS came along, IBM thought it would be a hardware driven market (ahem. like Apple…) and let MS have the ‘itty bitty software stuff’
Once IBM was bumped from its high perch, it decided to a) get back to doing what it does best in hardware–> mainframes etc and b) watch for the next wave…
IBM is now a very very hot services company that bundles its hardware with its services.. in fact, IBM’s brand almost REQUIRES that its hardware not be sold at Best Buy and Circuit CIty, etc. In other words.. IBM doesn’t care about the PC market.. This is a Service Economy.. and far be it for me to ‘give IBM the nod’ for focusing on selling busines expertise instead of commodity parts like Dell.
(For what it’s worth..Dell knows it too and does Business Consulting also)
Well Well look like Dell might be one of the company that might go down in the next 5 years.
Can Dell compete pricewise with a Chinese competitor? Will this drive down PC prices to the point of break the low end market?
Mike: At first sight, the words of LukeInOz seem to be stupid. However, but Levitt state it right.
If you own a restaurant and you think you are selling food, you’re wrong and your personnel will act as in a supermarket, because they are food-oriented, instead of services-oriented.
When you go to a restaurant, your espectations are on service over the food. A good service surpass a bad food; however, a good food does not surpass a bad service.
What does the customers in the computer market expect? One word: Service. Service is everything.
My father use to work as manager in a chain of Automotive Parts stores. Somebody told them once: You sell the service of haveing the parts that customer expect you to have or at least find that part as soon as possible, hence, you are a SERVICES company. Services on the automotive parts market, but your service is to get the right part for the right customer.
When you rethink on your company’s orientation, that sole new thought reorients your company.
Now for IBM to sell rebranded Macs (black instead of white?)
1500 dollars would be 4000 dollars today? Wow, that puts inflation in perspective.
As usual, ‘top tech pundit’ Enderle has his finger on the pulse
“New York Times reported today that IBM was in negations with Lenovo and one unnamed other for the sale of their PC business. This seems unlikely given the nature of this business today.”…….
….”Sale Possible, Lenovo Unlikely”
http://www.technologypundits.com/index.php?article_id=26
December 5th 2004
“Only” for $1.25B? I am surprised IBM couldn’t get more as articles said that it’d be around $2B and that was rather cheap. Does IBM desperate to get out of PC business? But then again, IBM did get 18.9% stake in Lenovo.
Nobody
But then again, IBM did get 18.9% stake in Lenovo.
You’re exactly correct. You factor in the stake that IBM has in the company they sell their PC division off to. Say if IBM got a 50% stake in Lenovo, would that make it worth them giving their PC division away with no cash up front? Just a thought…
So assuming Lenovo does well with this, and their stock price goes up, IBM did well for themselves. If Lenovo tanks, they will probably sell off their assest, and IBM will get 20% of that… so I don’t see a way IBM can lose, especially if they wanted to get out of the PC business. Maybe they see that market bottoming out soon (prices dropping through the floor)… If so, goodbye Dell. Well maybe Dell will stick around as a “services company” but I think IBM can do them better.
We’ll see.
piot,
Rob has become irrelavant. If he were to state tomorrow that the sun was going to rise in the East and set in the West, I would get extremely worried that drastic changes were about to occur.
This almost seems like a reverse buy out, like NeXT/Apple or eMachines/Gateway. It depends on the point of view.
IBM has bought a major stake in a Chinese manufacturer, IBM will retain control over branding and marketing. Lenovo has bought the right to manufacture IBM’s PC hardware.
Lenovo has been struggling somewhat of late, more struggling will raise the obvious speculation of further IBM investment. So this is more IBM getting stuck in to China rather than Lenovo in to the US/world.
Add in the Microsoft context, IBM hates MS, China hates MS, it sure looks bad for Microsoft.
Can you say “Value Added Reseller”? SURE YOU CAN!
IBM will be touting LINUX on Power Blade Servers with Mac OS X on the Desktop.
Sizewell
Rob has become irrelavant. If he were to state tomorrow that the sun was going to rise in the East and set in the West, I would get extremely worried that drastic changes were about to occur.
You contradict yourself. Either he’s irrelevant, in which case it doesn’t matter what he says, or not. Make up your mind.
Interesting observation…
… IBM hates MS, China hates MS.
More observations…
… IBM loved Linux, Lenovo (China) loves Linux.
… M$ hates Linux, and loves SCO!
… M$ is in USA, SCO is in USA.
… the US DoJ is in USA.
… Lenovo is in China, Linux is in China.
Will…
… M$ cry to the US Govt to sanction Lenovo CommieLinux boxes?
… M$ coerce Intel and/or AMD?
… Lenovo buy/build an ‘x86’ chip plant.
… M$ comprehend that China won’t be bullied?
… Ballmer’s eyes pop out of his head?
May BG3 and Ballmer live in interesting times
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Yup,
I guess I should have said that Rob is no longer veridical…
But he’s still irrelevant, none the less
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mike – I can only chuckle at your response to my post.
I find it amusing that people on here have to put others down to make their point! I’m sorry you feel I used vague points, and highlighted them, or that, as rick put it, my point seems “stupid”.
Firstly I wasn’t trying to make some hugely insightful statement – I don’t think I ever cached my thoughts as definitive; they were just that, my thoughts. I even admitted to the thoughts coming to me as I wrote (I note you had nothing to comment on what I said about the “digital lifestyle” strategy of Apple).
Also if you look at the Levitt article (as I trust you are aware of it), my point was based on that analogy.
I also must respectfully disagree with you that IBM has turned “its entire corporate culture on its head in the last 15 years” (though I note you did agree this was “(in a good way)”.
Also I was not trying to suggest IBM did this in order to make it “look like they ‘meant’ things to turn out this way.”.
My point, based on the Marketing Myopia concept, was that at least management at IBM weren’t so stubborn, or short sighted to see that they should eventually get out.
Regarding Xerox, I didn’t mean to suggest that they DON’T make photocopiers at all, my point (and I apologise for not meeting your requirements for clarity) was that they do much more than that now, and it is is a logical extension of that original business (even the photocopier was a logical extension of the “Xerox” carbon copy machines)
I also must respectfully disagree that IBM knows nothing about software. They were heavily involved with the development of NT (before Microsoft shafted them), and your could probably argue the reason NT was SO much better than the 9x variants of Windows was due to IBM’s input. Also they did develop OS/2, which was a pretty good operating system AT THE TIME (and YES IT DIDN’T DO WELL, but I’m sure MAC fans can relate to a good operating system not doing as well as it should commercially).
I am also a bit bemused by your derision of my post at the start, as the rest of your post, about IBM re-focussing on what it does best, and becoming a services company WAS EXACTLY MY POINT. They have at least (even if it is a bit late) finally jettisoned a part of the business that isn’t core to their future. Whether they meant for that to happen or not I was not trying to even comment on, I simply observed (in my lowly opinion – thankyou for letting me know this) that at least they did it, and I felt it was a good thing.
Regarding DELL being a consulting service:
1) I never said they weren’t, I just noted IBM was focussing on its strengths – which was smart business
2) Based on 1) I know who I’d choose to consult on a MAJOR IT infrastructure project
ON another note – thank you mike for reinforcing my recent posts elsewhere that some of the people on this forum feel compelled to “have a go at people”. rather than just make their point.
BTW – I am happy to note that some STUPID journalist seems to agree with me somewhat:
http://australianit.news.com.au/articles/0,7204,11631865^15302^^nbv^,00.html
I hope you find my response to you liking, I’m sure you’ll be quick to let me know if it isn’t.
Have a great day (it’s a sunny 26 Celsius (79 Fahrenheit) here in Sydney today)!
Cheers,
Luke
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Luke,
FWIW, I read ‘Megatrends’ by John Naisbitt several years ago, and it used the railroads scenario that you mention. (It also talked about Govt becoming less centralized and more localized, and other topics that would effect the world)
Anyway, this has always convinced me that Apple Computer was not in the computer business – even tho’ they primarily made money selling computers – but rather in the software solutions business. Their software was our solution, and we had to buy their hardware to get it.