The big news in Fridays announcement that IBM is selling its PC business is the fact that it is still in the business at all.
Lets face it. Except for its highly regarded ThinkPads, IBM hasnt been a player in the computer industry since the ill-fated decision to adopt a proprietary Micro Channel bus back in 1987. Couple that with its failed attempt to leverage OS/2 into the desktop OS champ—a quixotic quest that ended in the late nineties—and its obvious that IBM failed a long time ago.
Around the time that its desktop efforts were failing, IBM shed two other non-strategic assets—keyboards and printers. Thats how we ended up with Lexmark—and despite the fact that the company no longer makes my favorite buckling-spring computer keyboard, it still manages to pump out some pretty capable printers.
The last time I checked, Lexmark was making four bucks a share and was worth over $11 billion. Not bad for a “non-strategic asset.”
No, this isnt a big deal for IBM. The company long ago started focusing on services, not boxes, because thats where it thinks the money is. Despite those advanced labs in San Jose, Poughkeepsie and elsewhere, IBM isnt really a computer company anymore; its a consulting company.
IBM spent the last few years commoditizing everything below middleware, including the OS and the PC. That explains the fascination with Linux. A commoditized and free OS not only makes Microsofts key market position obsolete, it also makes the PC itself simply an off-the-shelf component. The consultants at the core of IBM have been recommending non-IBM hardware for years—Fridays announcement just puts the final stamp of legitimacy on something thats been going on for a while.
In fact, IBM should have gotten out of the PC industry a long time ago. Its been years since the company made memory, hard drives and Token Ring cards—why did they stick it out with PCs? According to ex-CEO Lou Gerstner, its been “painful and costly for IBM.” But he truly believes that the company could have competed. As he said in his 2002 memoirs, “If we had focused on the marketplace and done our homework, theres no reason the IBM PC business today would be looking up the leaderboard at Dell.”
Well that time has passed. The corporate desktop looks a lot like a terminal, circa 1985. Interchangeable parts are defined more by what they connect to rather than whats inside. In other words, its the services they run that are far more important—and theyll run just as well on a Dell.
Most of the PC excitement is happening at home, where Dell, Gateway, HP and others are jockeying for a piece of the media server market. From where I sit, those legacy PC vendors have already lost. Those devices will look a lot more like TiVo or iPod than your standard PC. But IBM hasnt been credible at home since its failed PC JR, so thats no great loss.
So what will happen to IBMs computer division? If I bought it, Id immediately slash the desktop line and focus on notebooks. Id continue to drive quality—IBM still makes the best portables in the industry. Id look very carefully at WinBook. The scrappy direct notebook vendor sold over a billion dollars worth of mostly well-regarded portables last year. WinBooks parent, Micro Electronics, also owns the off- and online retailer Micro Center, which sells a wide array of computing hardware and software.
And thats who I think will pony up the bucks for IBMs computer division. Sure, Chinas Lenovo group is a good alternative. But I think a domestic reseller of technology will ultimately win out. CompUSA, MicroWarehouse, Tiger Direct and other PC retailers now realize they need a house brand along with reselling products from others. My prediction: ThinkPad becomes a Best Buy brand division within a year.