* IBM PC-sell off: A sad day for the industry
It’s sad to see the end of an era. With the announcement last week of Lenovo’s plans to acquire IBM’ s PC business for $1.25 billion in cash and equity, we are all witness to the inevitable march of time in the IT business.
IBM is widely credited with inventing the commercial PC business. Yes, a few other companies dabbled in producing PCs before IBM, but IBM is the company that took PCs beyond the hobbyist level and onto the white-collar worker’s desktop on a massive scale.
I remember getting my first IBM PC. I was only the second person in a large engineering firm to get one. The first person to get his had to teach me how to use mine. This marvelous new device freed me from having to do manual calculations and from using an expensive time-sharing system to do my graphics. I was hooked from the first time I touched the keyboard.
And now it is with great sadness that I acknowledge that IBM is slowly leaving the PC business altogether. But I’m also a realist, and I agree that it makes little sense to hang onto a low margin commodity business. I congratulate IBM CEO Sam Palmisano for having the foresight and guts to sell the PC business now while it still has considerable value.
Chinese PC maker Lenovo is interested in purchasing IBM’s PC assets. Given that most PC manufacturing has shifted to the Far East in the past decade, this makes sense, too. While reports say that Lenovo wil now be headquartered in New York, the power of this busines is truly shifting to China.
Gartner Group has predicted that within the next two years, the PC industry will further consolidate and that at least three of today’s top 10 players will exit the business. IBM might be the first domino to fall, but it won’t be the last, according to Gartner. Rumors say that HP – which already consumed Compaq more than two years ago – could be next, although HP denies those rumors.
I feel very sad for the loss of innovation that will occur during this consolidation. From the very start and up to the very last, IBM has given the PC industry tremendous technical innovations – so much so that VARBusiness Magazine recently named IBM the 2004 winner of its Overall Technology Innovator award. Examples of IBM’s most recent PC innovations include Embedded Security Subsystem and Secure Data Disposal (see links below for more about these technologies).
Companies like IBM and HP have brought us break-through technologies that have greatly advanced desktop and portable computing. Sadly, companies like Dell and Gateway don’t have the R&D budgets to create new technologies; they simply adopt them once they are industry standards or commodity components. Who will be left to invent the new technologies? Could it be that we are doomed to use PCs that offer little innovation? Or is the innovation shifting from the hardware to the software?
I believe that users at every level – from the home to the enterprise – will be the big losers if companies like IBM and HP disappear completely from the PC market. I have to wonder, though – will buyers really care? It seems that buyers only care about price, and R&D that leads to innovations only adds to the overall price of a PC.
Yes, the end of this era is sad. Then again, it must have been sad to see the end of punch cards and typewriters. But when those technologies were no longer profitable for IBM, the writing was on the wall and it said: get out now before losing too much money. That seems to be Palmisano’s guiding principal on the decision to sell the PC business.
Linda Musthaler is vice president of Currid & Company. You can write to her at mailto:Linda.Musthaler@currid.com
