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Hot off the Press - News & Commentary
Friday, December 03, 2004 by Keith Benicek, Editor

                         

IBM Selling Off Computer Business to Japan or China

New York (TEE) - International Business Machines Corp has made semi-officially what we leaked on November 30th (link), they are selling of their entire computer business unit. The Wall Street Journal and the New York Times also confirmed this today. (Our moles are better than theirs!)

It really shouldn’t be of any surprise to market watchers though, as IBM hasn’t had a competitive product in the personal computer sector other than the ThinkPad, for the last five to six years. Even at that, the ThinkPad has always been over-priced and under-featured for most of the period of time.

So who would buy IBM’s small computer business? The World Media Digest, Jiji Press English News Service reported today the following: Tokyo, Dec. 3 (Jiji Press)--Toshiba Corp. had been approached by International Business Machines Corp. on a possible sale of the U.S. firm's personal computer business, it was learned Friday.

IBM had contacted Toshiba by spring this year to ask it to buy the PC business, informed sources said. But Toshiba declined the offer, the sources said.

If Toshiba had bought the business, it could have become the world's largest notebook PC maker, outdoing Dell Inc. of the United States.

The New York Times reported Friday that IBM is considering selling its PC business, and is currently in serious discussions with Lenovo Group Ltd., China's largest PC maker, on the issue.

The sale, likely to worth one billion to 2 billion dollars, is expected to include the entire range of desktop, laptop and notebook PCs made by IBM, the paper reported. (End quote)

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But is Japan the only possible suitor?
Apparently China is in the mix as well, as it is reported that China's Lenovo company is also in “talks” with IBM according to informant we have at IBM in New York. Lenovo Group Ltd is China’s largest maker of personal computers and is not aligned with any of the mega computer makers from Taiwan.

Not surprisingly, none of Taiwan’s huge personal computer and notebook makers are that interested in buying the IBM brand. Our calls to contacts at Quanta, Acer, BenQ, Copal, MiTAC and Twinhead (as well as others) reveal that that just are not that interested in IBM’s trailing market share name. All of these companies are quite satisfied with manufacturing for big market share leaders like Dell, Sony, Toshiba, Apple, Gateway and frankly all the other brands you’re familiar with. It should come as no surprise to you that neither IBM, nor any of the previously mentioned leading brands actually make nearly any of their own branded computers.

IBM had long since stopped manufacturing any of their branded computers, though they had once even co-owned large manufacturing facilities even in Japan. Mac owners would be surprised to know that IBM actually made PowerBooks in Japan for Apple in the 1990’s.

Many Wall Street analysts agree that this is probably a very good move for IBM, who says that they would like to focus on Services and Software. The PC business represents about 12 percent of IBM's annual revenues of 92 billion dollars and sales 5.6 percent of the world PC market. Upon the public release of this news, IBM stock finished at 97.08, +1.32 today.

My concerted opinion after analyzing the situation is that Lenovo Group Ltd, or another China based manufacturer, will be the likely buyer of the IBM computer unit. A Chinese company will have nothing to lose (they have an insignificant world market share now) and everything to gain from the purchase (they would pick up the ThinkPad™, NetVista™ and ThinkCentre™ brands).


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