December 7, 2004 11:28 AM PST

Michael Dell: IBM deal a dud

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IBM appears close to PC deal

December 7, 2004

A Legend in the making

August 12, 2002
SAN FRANCISCO--A deal that would let China's Lenovo acquire IBM's PC unit would work about as well as other mergers in the industry, Michael Dell said--that is, not well.

During a question-and-answer session Tuesday at Oracle's OpenWorld conference, the Dell chairman said a deal between Lenovo and IBM would likely follow a pattern seen in many mergers where two very different organizations fail to mesh.

"We're not big fans of the idea of taking companies and smashing them together," Dell said. "When was the last time you saw a successful acquisition or merger in the computer industry? It hasn't happened in a long, long time...I don't see this one as being all that different."

Dell also said his company is not interested in buying IBM's PC unit. Dell has only made a few acquisitions in its 20-year history. They have all been relatively small. The company's largest and first acquisition, ConvergeNet, helped get Dell into the storage market, but it didn't work out, and Dell dissolved the unit a few months later.

"We like to acquire our customers one customer at a time. We see organic growth as the more sustainable and healthy way," he said.

When asked how a deal would affect the Round Rock, Texas, computer maker, Dell was oblique but said the deal is part of a longer trend at IBM to move out of technology that's not part of back-end computer systems. By contrast, manufacturing is one of Dell's chief strengths.

"If you look over the last few years, there has been a continuing trend of not only declines in market share but de-emphasis and divestiture of various assets of the small computer system business at IBM. It's pretty clear this is not the long-term strategic priority for IBM," he said. "In our case, it's a different story. Last week, in stark contrast, we announced a brand-new computer manufacturing plant in North Carolina to support our growth in the U.S."

In recent years, Dell has also been gaining market share in China, a trend that has prompted Lenovo to cut prices.

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