IBMs sale of its PC division to Lenovo may be a good deal for shareholders, but I dont see customers cheering.
In jettisoning the low-margin personal computer biz, IBM spruces up its balance sheet but also shows longtime customers they are as disposable as, well, a formerly mighty business unit.
Big Blue will own nearly 19 percent of Lenovo and about 10,000 IBMers will move to the Chinese company. Dont you just know theyre feeling good today? How many American IBM employees ever imagined theyd end up employed by a Chinese company—even one thats moving its headquarters to New York?
Interesting factoid: IBM says more than 40 percent of the Lenovo transfers already work in China, while less than 25 percent are in the United States, according to published reports.
Lenovos new CEO will be the former head of the IBM PC group. Thats reassuring for as long as it lasts. But if history is a guide, at some point Lenovo will start chasing the IBM people off and economizing. If theyre not careful, the Chinese managers could wring the soul from their new acquisition.
Dell and HP can be expected to do everything possible to scare IBMs PC customers. It may, however, be hard for companies who rely on Chinese manufacturing to differentiate themselves. Well have to see how that works out.
IBM will doubtless make the case that nothing significant is going to change and the PC business will operate as it had before the sale. I doubt thats entirely what will happen, but it could play out that way. We just have to what and see how that works out too.
Since the talks first became public, Ive received a number of messages from IBM PC customers, expressing their disbelief that they were being abandoned. Sure, China Inc. makes very nice computers, but customers liked the confidence that came with the IBM brand. And they didnt mind paying more to get reliability and features.
The ThinkPad notebook line has always been considered a solid corporate purchase, especially as other portable PC vendors suffered their ups and downs. Sure, notebooks became commodities, but ThinkPad owners are second only to Macintosh users in their missionary zeal. Im sure there are people out there who dont like ThinkPads, Ive just never run into any of them.
It will be interesting to see what Lenovo does to the IBM brand name. Any perceived change in quality or level of innovation will work against IBMs total corporate image. As a cautionary note, AT&T was a respected company until it bought TCI, the much-hated cable TV company, and put its name on it without solving TCIs problems first. That wasnt all that cratered AT&T, but the brand suffered greatly as it was expanded to include products and services people didnt like.
There has been speculation that once its business is sold off, IBM will try to sell customers on a new generation of machines based on its PowerPC chips and some sort of Linux-y operating system.
If IBM really wants to follow this path, it might as well buy Apples Macintosh business, whose hardware is a Unix variant running on PowerPC processors. That this might actually happen—IBM trading its PC business for Apples Macintosh business—is too surreal to be taken seriously.
It seems most likely that IBM is out of the desktop and notebook business for good.
Something we may see as a result of this deal is a bit of public furor over China Inc. buying such a visible brand as the IBM PC. Many will remember the fear that existed 30 years ago when it seemed to some that Japan would end up owning everything American worth having. That didnt occur, of course, and the Japanese economic colossus sank into recession from which it still hasnt recovered.
Since the Japanese economic scare, the U.S. economy has become quite integrated with those of other nations, especially China. Americans are so used to buying Chinese goods that the Lenovo deal may go unnoticed. But for those who question the value of globalization, its likely to set off some warning bells.
And China remains—at least theoretically—one of only a couple of nations that could still feel the wrath of the United States in an all-out war. Both Taiwan and Korea remain significant sources of tension in the region, and the United States has long-standing ties. For all its “economic miracle,” China fundamentally remains a totalitarian, mostly third-world nation.
I wonder whether China would provoke its best customer, but fear an American president could have trouble standing up to such a huge trading partner.