December 7, 2004 7:27 AM PST
IBM appears close to PC deal
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China, near Lenovo's Hong Kong base. The new owner would likely gain the majority stake in that venture.
But IBM's Think Centre desktop line is produced under contract by Sanmina-SCI in North Carolina, near Raleigh, where IBM's PC business has traditionally been headquartered.
In January 2002, IBM sold Sanmina-SCI its desktop manufacturing operations in the United States and Scotland, which included some 980 employees, for an undisclosed sum. At the same time, IBM signed a three-year contract for Sanmina-SCI to manufacture the desktops. Later, IBM extended the agreement, hiring Sanmina-SCI to build some IBM xSeries server models as well.
Maintaining good relations with IBM's customers will be another concern for the PC group's new owner.
Although analyst firms such as Gartner are advising customers to hold tight until the details of any arrangement are fully disclosed, at least some IBM customers are likely to be nervous about the implications of a potential deal.
"They should not change their buying behavior based on rumor or speculation," said Leslie Fiering, an analyst at Gartner. "Until there's factual information available and the terms and conditions of the deal are known, it's premature to take any action."
It's not yet clear whether IBM would retain some part of technical support or continue to offer service contracts to PC customers, a move that would likely put some customers' fears to rest.
By the end of 2005, many businesses and consumers will have replaced their oldest computers, completing the latest PC replacement cycle, Gartner predicted in a report last week. Given that owners typically replace desktops every four years and notebooks every three years, there is likely to be a drop in demand between 2006 and 2008. That period will see average annual unit shipments slow to 5.7 percent and revenue growth subside to 2 percent, Gartner predicted.
So-called emerging markets such as China are expected to see the best growth during that time, a boon for a potential IBM-Lenovo joint venture. But that would be offset by slack demand elsewhere, the Gartner report added, leading to further consolidation if PC makers don't prepare now by lowering their costs.
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