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IBM reportedly selling PC unit

Sat., Dec. 4, 2004

NEW YORK — International Business Machines Corp.’s possible exit from the personal computer business would be the latest move in what amounts to a long goodbye from a field it pioneered and revolutionized.

Armonk, N.Y.-based IBM helped bring personal computing to everyday users with its introduction of the IBM PC in 1981. But as prices fell and competition mounted from the likes of Dell and Hewlett-Packard, IBM started selling its factories in the late 1990s.

And in 2003, it sold the last PC plants it owned alone — a factory in Scotland and the lease on a plant in Mexico. IBM contracted with other companies like Sanmina and Great Wall Technology to assemble the PCs and ThinkPad laptops carrying the IBM name.

The company’s new focus is its services and outsourcing businesses, which it calls Business Transformation Services, a market IBM CEO Sam Palmisano says is worth $500 billion a year. For example, it signed a $300 million, 10-year technology outsourcing deal with the government of British Columbia Friday. Under the deal, 170 provincial employees will be offered jobs at IBM.

The New York Times reported Friday that IBM is in serious discussions with the Lenovo Group, China’s biggest maker of personal computers, and at least one other unidentified prospective buyer for a sale that could bring between $1 billion and $2 billion. Other possible buyers could include Japan’s Toshiba Corp., analysts said.

The newspaper cited anonymous sources close to the negotiations; the Wall Street Journal online also reported the company was in talks with Lenovo, and Chinese papers had reported the story as early as June.

IBM spokesman John Bukovinsky refused to comment Friday. Spokesmen at Lenovo’s Beijing headquarters and Hong Kong offices did not return calls Friday.

In the wake of the reports, IBM shares rose $1.62, or 1.7 percent, to $97.38 a share in afternoon trading on the New York Stock Exchange.

Before the introduction of PCs, only hulking mainframes could complete computer-level computations. The machines were so expensive, only the biggest companies and wealthiest universities could afford one. But as personal computers shrunk in size and price over the last two decades, they have become fixtures on the desks of everyone from college students to rocket scientists.

The pressure is on for prices to go even lower. To the executives in charge of corporate technology, “PCs are beginning to look more like pencils,” said Eric Johnson, director of the Center for Digital Strategies at Dartmouth University’s Tuck School of Business. “They are just a commodity appliance,” he said.


 

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