IBM Considers PC Unit Sale, JV To Lenovo
IBM is considering a sale or joint venture of its PC
unit with China's Lenovo Group (formerly Legend). The
proposal would allow IBM to exit the highly commoditized
PC business, in which it is now more difficult for companies
to become profitable.
Neither company has commented on the reports.
The Lenovo Group itself has suffered from poor
performance in the Chinese market and overseas. During
2004, it has been largely beaten in the Chinese domestic
market by Dell,
which has consistently beaten their products in price
and quality. In the Chinese local media, some rumors have
even stated that the Lenovo Group is more interested in
entering the investment
banking business than computer hardware manufacture
and distribution.
However, Lenovo's reputation in the business do not permit
it that option. Since the summer, the company's management
has focused on fixing what's wrong with the computer hardware
business. Main weaknesses are supply chain management
and cost management, which do not compare in efficiency
with the Dell business model.
For IBM, selling off the PC division would allow it to
exit a business in which it has become harder to maintain
profits. Virtually all IBM PC manufacture is now outsourced
to makers in China, while the company has focused on research
and next-generation products, especially chips. The company
has been particularly strong in the development of a next-generation
multi-core processor called the Cell, which it has co-developed
with Sony and Toshiba, and will be the graphics processor
for the Sony Playstation 3, which will be introduced in
2006. The Cell architecture was also developed to eventually
power business servers, a highly profitable business for
IBM.
For Lenovo, an outright purchase or joint venture with
IBM would give the company access to the low-end of IBM's
corporate business and channels globally. In China, most
new businesses which have formed since the economic reforms
began in the eighties have been privately-owned, and this
small and medium sized business have been an important
growth area for Chinese hardware
makers.
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