|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
The Auto Beat
Byte of the Apple
Europe Insight
Eye on Asia
Getting In
Investing Insights
The New Entrepreneur
NEXT: Innovation Tools & Trends
On Media
Technology at Work
The Tech Beat
Traveler's Check
TECHNOLOGY
Product Reviews
Tech Stats
Hands On
AUTOS
Home Page
Auto Reviews
Car Care & Safety
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip FINANCE Investing: Europe Annual Reports Bloomberg BW50 SCOREBOARDS Hot Growth Companies: 2008 Mutual Funds Info Tech 100 B-SCHOOLS Undergrad Programs Rankings & Profiles | |
DECEMBER 6, 2004
By Spencer E. Ante Sam Palmisano's Many Messages Selling IBM's PC unit would be a telling move about the future of Big Blue, about the tech industry, and even about Corporate America IBM Chief Executive Samuel J. Palmisano has never been your typical suit. During his 31-year career at Big Blue, he has taken bold actions and broken with IBM (IBM ) tradition when it made strategic sense. When he ran IBM's server group, the former center of the Johns Hopkins football team drove the company to embrace the then-radical Linux operating system. Nine months into his job as CEO, Palmisano turned heads by scooping up the consulting arm of PricewaterhouseCoopers for a reasonable $3.9 billion. And just before celebrating his first-year anniversary in the top spot, Palmisano disbanded IBM's hallowed 93-year-old executive-management committee and set up a more decentralized operating structure to speed up collaboration and decision-making. All of these moves have proved to be prescient and profitable -- Palmisano was well on his way to remaking an American icon (see BW Online, 12/3/04, "Is Big Blue Back?"). CREATIVE DEALMAKING? Now it appears as if Palmisano is making perhaps his boldest move yet: Getting IBM out of the personal computer business. By marketing a PC in 1981 with clever commercials that featured a Charlie Chaplin-like figure, IBM helped transform a geeky niche market into a mainstream business touching households and businesses across America. Some analysts have been cajoling IBM for years to exit the ultracompetitive business, but it looks like Palmisano is the one who has the guts to break so starkly from the past. If sold, IBM's $12 billion PC unit is expected to fetch $1 billion to $2 billion. IBM has struggled to make money selling PCs, and the commoditized machines don't help IBM hold onto customers nearly as much as they used to. In the first nine months of this year, the PC group reported a $70 million pretax profit, on $9.4 billion in sales. A source close to the deal confirms that IBM is discussing the business' sale with Lenovo, China's largest PC maker, and with at least one other bidder. The transaction may ultimately involve some creative dealmaking in which the two outfits become partners and Lenovo maintains the IBM brand on PCs while IBM continues to own the sales and service relationship. Other potential acquirers may include a private-equity firm or another Asian computer maker. "IBM wants to continue to be the face to the customer," says Gartner analyst Tom Bittman. STRONG STATEMENT. If the deal happens, it would bolster Palmisano's strategy of moving up the tech food chain. The concept is to exit commodity hardware technologies and bulk up in higher-margin software and services businesses. What's more, the potential move raises all sorts of fascinating questions about IBM's future and holds implications for Corporate America and the technology industry at large. If IBM dumps its PC division, it wouldn't radically change the way the outfit does business. Big Blue already exited the consumer PC business years ago, and in January, 2002, it sold off its desktop PC manufacturing operation to contractor Sanmina-SCI. The more significant impact would be the symbolism of such a transaction. First, Palmisano is sending a strong statement to IBM employees. The message is that services, software, and high-margin hardware, such as computer servers, are more than ever the way of the future. Sure, Palmisano has thrown mature hardware businesses overboard before. In one major transaction early in his tenure, IBM sold off its hard-disk-drive business to Hitachi (HIT ). But because PCs have played such a major role in IBM's history and corporate identity, this would be the strongest sign yet that the new Big Blue will look very different than even the Lou Gerstner-era outfit.
BW MALL
SPONSORED LINKS
Buy a link now! | | |
 Copyright 2004, Bloomberg L.P.Terms of Use | Privacy Notice |
Printer-Friendly Version
