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izanami
PopStar
Joined: Jan 27, 2004
Posts: 1037
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Dec 08, 2004 - 11:52 PM |
 
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| Post subject: Lenovo Acquires IBM PC business |
I am quite devastated. Sorry...but I am! Got home, checked the news, and am greeted by this shocker. I am an IBM lap top fan, my first lap top in college was a T40, and I'm on my T41 now. Now, I'm not quite sure if I will get an IBM laptop in future, even if they retain the original IBM trademark.
Maybe I will get a Powerbook or a Toshiba in future. I'm not saying that Lenovo is a bad PC maker, but it just feels quite different. And I'm not sure how the new management will play out. But I must admit though that it is a great step for Lenovo to take towards the international market, although the price paid is debatable. I'm not confident though that the IBM brand value for PC will not diminish in value.
Lenovo and IBM near PC deal
By Francesco Guerrera in Hong Kong and Mure Dickie in Beijing
Published: December 6 2004 04:50 | Last updated: December 6 2004 22:01
Lenovo, China's largest computer maker, is set to announce as early as this week that it will pay about $1.5bn in cash and shares for IBM’s PC business leaving the Chinese group with IBM's famous “Think” brand.
It is understood the talks over a purchase that would make Lenovo the world's third-largest computer maker, and give IBM a share of more than 5 per cent in the Chinese group, are at an advanced stage and an announcement could come this week.
But the talks are at a critical stage and could collapse, possibly paving the way for the sale of the IBM unit to a rival suitor. Rumours that US buy-out groups such as Bain Capital or Thomas H Lee Partners may be interested in bidding are rife on Wall Street.
But Clayton Dubilier & Rice, which often invests in underperforming units and in 1991 bought Lexmark, IBM's printing unit, is not interested, insiders say. Nor is Warburg Pincus, the buy-out group that often invests in technology companies.
A sale of IBM's PC unit to Lenovo would mark an historic exit from one of its traditional businesses and highlight the growing clout of Chinese electronics makers. IBM is believed to have agreed to sell the entire PC unit and the “Think” brand and logo.
The brand is valuable because of its association with the “ThinkPad” series of laptops. Lenovo is also likely to gain the rights to use the IBM brand on the computers for some years if it succeeds in buying the business.
Use of the IBM brand is potentially crucial, since without it even loyal ThinkPad buyers would be unlikely to shift to the little-known Lenovo brand. Analysts said the deal could enable Lenovo to cut procurement costs. Taking Lenovo shares as part-payment for the PC unit would let IBM retain an interest in a business that has been upstaged by more profitable arms such as servers and IT services.
It is understood IBM is discussing taking a stake of more than 5 per cent in the Hong Kong-listed subsidiary of the Chinese group.
Analysts said the deal was likely to include a lock-up period when IBM would not be allowed to sell the shares. Lenovo shares, which have fallen more than 30 per cent over since January, were suspended yesterday at HK$2.675 pending an announcement, valuing a 5 per cent stake in the group at HK$1bn ($130m).
The rest of the funds to buy the PC unit, believed to have reported a small profit before one-off exceptionals last year, would be from Lenovo's cash pile of some $400m and debt. Lenovo and IBM, and its adviser Merrill Lynch, were unavailable for comment on Monday.
Additional reporting by James Politi in New York |
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Tell me what you eat, and I will tell you what you are.-- Brillat-Savarin |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Dec 13, 2004 - 03:29 PM |
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Being a Thinkpad fan myself (although now converted to Toshiba), I think the change was for good.
IBM is not a hardware company anymore, maybe only for very advanced semi-conductors. Even its hard drive division was sold to Hitachi coupla years ago. It made no sense to keep owning something that adds very little value to the group as a whole. IBM is a service company today, they were VERY successful in making the switch from a hardware to services company. Fact is Wall Street tends to punish IT companies severely, and owning expensive inventory in a stretched supply chain is something that hardly creates momentum for IBM. And truth be said, IBM was very very far away from the supply chain management leaders, a key competency in the high tech industry.
The key for Lenovo is to keep IBM's people. As you mention, Thinkpad is an unmistakable powerful brand with a history of reliability without parallel in the industry. I wouldn't change my Thinkpad for a Dell for no money. BUT, to keep the brand thriving requires some focus that I don't think IBM is able to provide, given their service orientation. Today most of IBM's sales are corporate sales where the hardware is only a small part of a service contract.
If Lenovo keeps IBM's key staff, they have a pretty good chance in becoming a globalized company. That will be fun to watch.
As for Dell and HP, this is a heavenly opportunity for them to grab as much market share as they can, specially for HP.
Exciting times ahead in the high tech industry... |
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littlefox
Fire-eater
Joined: Nov 23, 2003
Posts: 2773
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Dec 13, 2004 - 05:24 PM |
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Personal Opinions:
PC market is saturated, now everyone is going to make money from server.
Let's take a look at HP and IBM:
HP has been advertizing a lot since purchased Compaq last year and it starts to make huge profits this year, which is really a strategic move for HP (HP has been leading ahead in printer's market all the time but could never compete with Compaq in server market). I think it's even possible for HP to take over IBM in the server market.
HP's development plan would be:
High-end Products: Alpha Server will quit the market in 2006 since it's sold to Intel, it's predictable it won't release any new products;
HP9000 series: will convert to Itanium 2 series after 2006, non-stop server and intergrity series.
Change of Supporting Operating System:
Original: Alpha -> OpenVMS 、 Tru64 UNIX
HP9000 -> HP-UX
2006: OpenVMS, Linux 64, HP-UX 11.3 (release in 2005), Windows Server 2003 since Itanium 2 processor will be put in use.
Now let's look at IBM, me thinks IBM wants to develop their business in server market. Most of the banks use the IBM server which is the major profit for IBM now, such as AS400.
In additional to IBM and HP, what else? Dell? Acer?
Dell is so not going to grab any shares of low-end market with its PowerEdge server.
Seems in the future there will be a three kingdom of HP, IBM and SUN shares high-end server market.
o no! probably Japanese brands will take the PC market.  |
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Ah, the ubiquitous idiots... |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Dec 13, 2004 - 06:41 PM |
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Sorry but what the fck has japanese brands to do with the PC market? Can't we just look at the facts and look at the market as a country-independent set of enterprise with the common goal of making a buck?
Japanse products are mostly manufactured in China. Good for China, good for Japan. The really top notch stuff is kept in Japan though, for intellectual properties problems that indeed are a big thing. When China grows up and adopt a stronger IP legislation they will profit even more from the japanese companies.
As for HP and IBM and Dell: Dell is pretty fcked in the big servers and consulting part of the IT business i.e. they are in the commoditized part of the business. Their only big advantage: 2 days average stock turn, simply unbeatable, makes them a Wall Street darling. Other than that, they suck: their notebooks are crap, their PCs are crap, and so forth. They have a solid plan to develop into the Consumer Electronics market and the digital gadgetry as well (pdas, mp3 players, printers, ...).
Dell in the end is nothing else than a supply chain management company. That's what makes them successful. Look at their balance sheet. Which kinds of testify to UPS' CEO statement: "The strategy of a company will become the strategy of its supply chain". And that's a point where neither HP nor IBM and Lenovo have the edge.
Anyway, let's wait and see, friggin interesting. |
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serend
FooJay
Joined: Aug 31, 2004
Posts: 1712
Status: Offline
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Dec 14, 2004 - 09:54 AM |
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IBM is like a high-tech GE. There core competence is their high level of IT and infrastructure service quality, AND their remarkable flexibility. And the spin-off of its PC business is a reflection on that flexibility.
PC already is a commodity. Margin has to be squeezed out of cost savings, and we must admit cost saving is never a forte of large US companies, let alone IBM. So IBM takes itself away from a low-margin dog-pond, in which it has no competetive advantage, and focuses on high-margin business where barrier of entry is high and less competetion is expected from China and India. Smart move.
The real question, though, is what Lenovo is getting out of the billions of US$ it paid for the deal. Brand prestige does not pass on to the next owner, especially of the customers understandably wax nostalgic, as izanami did. |
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izanami
PopStar
Joined: Jan 27, 2004
Posts: 1037
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Dec 14, 2004 - 11:19 AM |
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just to add on to Serend's comments, my scepticism about this deal also centers on management and company culture issues. Already, it is hard enough buying over a large business unit and integrating it, and I think the difficulty will be multiplied with cross-cultural gaps and different corporate cultures. Also, many of IBM's big clients are MNC corporates, I'm wondering if they will take this acquisition well. And it is true, buying the brand doesn't mean that the brand value will be sustained. Anyway, I totally forsee this deal becoming a future HBS case study. |
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Tell me what you eat, and I will tell you what you are.-- Brillat-Savarin |
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