IBM said to be in PC divison sell-off talks

JV with Lenovo seems more likely than a sale

By Tony Smith • Get more from this author

Posted in Financial News, 3rd December 2004 11:12 GMT

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IBM has reportedly put its PC business up for sale, 23 years after launching the first computer to carry that name.

According to a Financial Times report today, citing sources close to the negotiations, IBM is in talks to sell off its desktop and notebook lines.

It's certainly talking to Chinese PC vendor Lenovo, the sources said, confirming earlier reports that the two firms were in talks. Those discussions were thought to centre on a partnership to produce PCs for the Chinese market, but there were hints that the talks also took in the possibility of a worldwide alliance.

However, the original reports pointed to a joint venture rather than the sale of IBM's PC division to Lenovo or another company, as the FT's sources paint the situation.

Either way, the deal ultimately hinges on the use of the IBM brand. Without that name, or others, such as 'ThinkPad', the company has little to offer beyond facilities. Certainly the products it offers are, by and large, little different from anyone else's, which is largely why IBM has fallen behind the likes of Dell and HP. Such is the nature of a commodity market, particularly one where margins are so slim.

Still, IBM doesn't do badly out of its PC sales - it makes around $11bn a year from PCs - which makes an outright sale seem less likely. Indeed, IBM is currently the world's third most successful PC maker, with a 5.6 per cent share of the global market. That's a long way behind market leader Dell's 16.8 per cent share and number two-placed HP's share, 15 per cent.

However, a JV designed to capitalise on economies of scale to make PC production cheaper for both parties makes far more sense, particularly as a number of market watchers, most notably Gartner, are forecasting a big downturn in the PC market in the coming years. If that's the case, consolidation is going to appear on a number of PC makers' agendas.

IBM would not comment on the sources' claims. ®