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.

Despite the concerns, analysts have largely said it could be a wise move for IBM to exit the business of building PCs. The timing could be favorable: Although 2005 is expected to be a relatively good year for the PC industry, those good returns will give way to several years of slower sales of PC hardware, analysts have predicted.

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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Based upon History, IBM has become a failure!
Having been involved with IBM directly for almost 28 years, I am sorry to say that IBM has become a loser! It has been very painful to watch IBM always taking the easy way out of their bad decisions. They existed the PC Hard Drive business because they failed. A large number of their drives where failing and no doubt OEMs and users alike where refusing to buy their drives. They had no choice but dump the business. They have become the elephant that can not dance.
Posted by tbeckner (56 comments )
Reply Link Flag
Will the US Government not block this move
IBM has over the years may not have been innovative and flexible enough and might also not moved as quickly as they neeeded to do in order to keep up with the competition. I am of the view that their real problem with the PC Business began when they allowed Microsoft to get ahead of them when the battle was Windows against "OS/2 Warp" Operating System. Had they done what they were suppose to do then the situation might have been different. Windows it is believed presently control over 90% of the desktop market place. With the Chinese Government involved in the Lenovo PC Business and with certain levels of restriction with regards to specific computer technologies falling into the hands of foreign companies... one wonders if the United States Government does not plan to intervene in the pending deal with this Chinese company. How long before we see the United States PC industry go the way like the automotive and steel industries?
Posted by (187 comments )
Link Flag
Based upon History, IBM has become a failure!
Having been involved with IBM directly for almost 28 years, I am sorry to say that IBM has become a loser! It has been very painful to watch IBM always taking the easy way out of their bad decisions. They existed the PC Hard Drive business because they failed. A large number of their drives where failing and no doubt OEMs and users alike where refusing to buy their drives. They had no choice but dump the business. They have become the elephant that can not dance.
Posted by tbeckner (56 comments )
Reply Link Flag
Will the US Government not block this move
IBM has over the years may not have been innovative and flexible enough and might also not moved as quickly as they neeeded to do in order to keep up with the competition. I am of the view that their real problem with the PC Business began when they allowed Microsoft to get ahead of them when the battle was Windows against "OS/2 Warp" Operating System. Had they done what they were suppose to do then the situation might have been different. Windows it is believed presently control over 90% of the desktop market place. With the Chinese Government involved in the Lenovo PC Business and with certain levels of restriction with regards to specific computer technologies falling into the hands of foreign companies... one wonders if the United States Government does not plan to intervene in the pending deal with this Chinese company. How long before we see the United States PC industry go the way like the automotive and steel industries?
Posted by (187 comments )
Link Flag
Will the US Government not block this move.
IBM has over the years may not have been innovative and flexible enough and might also not moved as quickly as they neeeded to do in order to keep up with the competition. I am of the view that their real problem with the PC Business began when they allowed Microsoft to get ahead of them when the battle was Windows against "OS/2 Warp" Operating System. Had they done what they were suppose to do then the situation might have been different. Windows it is believed presently control over 90% of the desktop market place. With the Chinese Government involved in the Lenovo PC Business and with certain levels of restriction with regards to specific computer technologies falling into the hands of foreign companies... one wonders if the United States Government does not plan to intervene in the pending deal with this Chinese company. How long before we see the United States PC industry go the way like the automotive and steel industries? Early in a game of "chess" the pawns are taken followed by the other pieces... it will be quite interesting to see if "Deep Blue" can really aid in IBM's survival further into the Time Warp!
Posted by (187 comments )
Reply Link Flag
Will the US Government not block this move.
IBM has over the years may not have been innovative and flexible enough and might also not moved as quickly as they neeeded to do in order to keep up with the competition. I am of the view that their real problem with the PC Business began when they allowed Microsoft to get ahead of them when the battle was Windows against "OS/2 Warp" Operating System. Had they done what they were suppose to do then the situation might have been different. Windows it is believed presently control over 90% of the desktop market place. With the Chinese Government involved in the Lenovo PC Business and with certain levels of restriction with regards to specific computer technologies falling into the hands of foreign companies... one wonders if the United States Government does not plan to intervene in the pending deal with this Chinese company. How long before we see the United States PC industry go the way like the automotive and steel industries? Early in a game of "chess" the pawns are taken followed by the other pieces... it will be quite interesting to see if "Deep Blue" can really aid in IBM's survival further into the Time Warp!
Posted by (187 comments )
Reply Link Flag
 

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