IBM’s personal computer business

Jaume Ribera

e-business Center PwC&IESE

20/12/04

For many, the purchase of IBM’s personal computer business

by Lenovo (the former Legend), a Chinese company, may spell

out an end of an era, which started with the first IBM PC back

in 1981. However, the news should not be much of a surprise

to those who have followed the history of IBM nor to those

who know the evolution of Lenovo. On the one hand, IBM’s

PC division has not made a profit for some time. On the other,

Big Blue has made it quite clear that it wants to compete more

with Accenture than with Dell.

In technological companies, it is customary for manufacturing

models to develop as technology matures. In the first years of

life of a technology, companies try to vertically and centrally

control all the stages of the value chain while, as the

technology develops, companies opt to decentralise or

outsource part of this chain to focus on innovation.

This evolution may be undertaken by setting up subsidiaries or

joint-ventures in countries with lower costs, or even wholly

subcontracting product manufacturing to the so-called Contract

Manufacturers (CM), a sector led on a global scale by

Flextronics and Solectron. These companies are themselves

developing into Contract Design Manufacturing (CDM) and

Original Design Manufacturing (ODM) while they expand

their own cover of the chain, incorporating their own design

activities and offering original products to be sold by known

trade marks.

At present, most of the design and manufacture of PCs sold by

IBM, HP, Dell and other leading makes with a western look are

now being made in these conditions in Asia. As a New York

Times article put it in February 2001, “Ignore the Label: Its

Flextronics inside”, paraphrasing the well known slogan “Intel

inside” that appears on practically all PCs.

Although IBM’s latest move is not surprising, there are certain

essentially different characteristics in this case that are worth

pointing out. Firstly, IBM is selling off its business. That is, it

is not trying to outsource part of its business and free resources

in mature technologies to funnel them into new technologies

and products. It is actually gettin

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