Going, Going, Gone: IBM Sells PC Group To Lenovo

It was rumored before, but now, as Rick Zeman writes, "It's official: According to news.com, IBM has sold their PC business in a complex arrangement where, 'under the deal, IBM will keep an 18.9 percent stake in Levono. Lenovo will pay $1.25 billion for the IBM PC unit and assume debt, which will bring the total cost to $1.75 billion. Lenovo will pay roughtly $650 million in cash and $600 million in securities.' Plus, Lenovo will be able to use the IBM and Think names for 5 years."

Comments

Get a Gateway

[omarius]

That's a damn expensive IBM PC unit. The clones are a lot cheaper, people.

Re:Get a Gateway

[badasscat]

That's a damn expensive IBM PC unit. The clones are a lot cheaper, people.

Uh, what? They didn't buy a PC, they bought a whole PC Business. Unless you mean the clone makers are also cheaper, but that doesn't make much sense either - Gateway's brand name is nothing compared to IBM's.

I don't suppose you've ever used a Thinkpad or you'd know why it's a sought-after business. I'd be surprised if they weren't still the top selling laptops (they may not be, I'd just be surprised if that's the case), and they're still by far the best built mainstream laptops you can get (don't even bring up Apple, people - if you do, you have no idea what you're talking about). They're also among the last major makers not to pre-load their PC's with large quantities of junk. You buy most Thinkpad models and you get a PC and an OS. What you do with it is up to you.

I think this is a sad day, quite honestly. Things change in the PC industry and nothing against Levono or Lunovo or whatever Legend's calling themselves these days, but I don't have much confidence that the quality of the Thinkpad line will be maintained. At best, within five years you'll see cost-cutting to the point where there's little to distinguish them from other laptops. I mean there's a reason IBM sold this unit, after all - they can't charge enough for these things to make a meaningful profit on them given the production costs, and they can't realistically cut costs themselves because the quality is the main reason people buy them. So, they've cut and run, and left Legend to do the dirty work that they couldn't - which is more than likely to basically gut the hardware and sell off all that currently bare desktop real estate until the line is profitable. I just wonder if anybody's going to still buy a Thinkpad under such conditions, because people buy Thinkpads now specifically to stay away from cheap crap.

I guess this is why they've only got a five year window to brand them as IBM Thinkpads - IBM doesn't want their name sullied as part of the deal. Which begs the question, what's really in it for Levono? What do they do in year six? So they end up with a bit more production capacity than they have now; is that worth billions of dollars? They're not getting any major branding out of this deal that I can see, or any IP, or anything else that they can really build off of. It seems very short-sighted on their part, doesn't it?

Re:Get a Gateway

[BoomerSooner]

I was going to buy a Thinkpad T42 but now I'll get an Apple Powerbook on it's next rev (January in all likelihood).

BTW Apple is #1 in Laptop customer satisfaction. I love Thinkpads (I have 2 right now) but I won't buy a Levono Thinkpad.

So long IBM, it was nice knowing you. Who would have thought Apple would out live IBM in the PC market? Didn't see that coming.

Re:Get a Gateway

[Anonymous Coward]

Uh, what? They didn't buy a PC, they bought a whole PC Business.

*------- Joke.

O ----- You.
-|-
/\

Re:Get a Gateway

[phrasebook]

I love Thinkpads (I have 2 right now) but I won't buy a Levono Thinkpad.

What reasons do you have for that? You don't even know what they're going to be like. It's maybe a bit unfair to assume the ThinkPad standard will go backward under Lenovo. Or other reasons beside technical merits?

Re:Get a Gateway

[jm92956n]

I, too, have wondered why Lenovo would pay so much for IBM's PC division. I expect we'll see a new logo almost immediately: most likely the current IBM logo with a small "powered by Lenovo" line underneath. In a few years, the logos will be reversed, with Lenovo's name as the more prominent one. Within five years, the logo will have no reference to IBM. This is the route IBM took with Lexmark when they spun them off.

I think the laptop market is nearing saturation in the U.S. A few years back, we thought the desktop PC would die off; laptops would become so inexpensive and so powerful that there would be no reason to purchase a desktop. That notion, however, has proved to be untrue.

With IBM holding nearly a 20 percent stake in Lenovo, it's likely that they'll provide them with whatever relevant IP they develop. That's they key. IBM will still be financially tied to Lenovo, so it's in both of their best interests to insure their laptops and PC's remain competitive. I wonder, though, if IBM might eventually sell off their portion of Lenovo.

Re:Get a Gateway

[BoomerSooner]

The better safe than sorry reason. Paying a premium for a laptop isn't a problem. Paying a premium for an unknown item is not a good choice. I guess that is what I get for working in risk management.

When I worked at Andersen they used Compaq and IBM laptops. I got lucky and got an IBM. The compaqs were breaking so often that they were switching completely to IBM (then they fucked up and got shut down!).

Re:Get a Gateway

[Yaztromo]

(don't even bring up Apple, people - if you do, you have no idea what you're talking about)

I take umbrage at that. You see, I used to work for IBM. I've had a number of ThinkPads over the years. I also currently own an Apple PowerBook. And I'd easily put this system in the same league as the ThinkPad (if not slightly higher -- where most modern ThinkPads are designed primarily as Windows systems, Apple's boxes are at least Unix based).

If you don't lock yourself into a specific architecture, you can see that Apple's PowerBooks easily rank up there with IBM's ThinkPads. Indeed, these are the only two companies for a very long time who have done any significant R&D into laptop usability. I'd pit my PowerBook against an Intel-based laptop any day.

I guess this is why they've only got a five year window to brand them as IBM Thinkpads - IBM doesn't want their name sullied as part of the deal. Which begs the question, what's really in it for Levono? What do they do in year six?

In year one I imagine they'll use the IBM name. In year two they'll introduce some models under their own name in certain parts of the world. In years two through five they'll brand their systems under both the IBM and Lenovo names at the same time (ie: both logos on the boxes).

The idea being they'll wean their customers into thinking of their brand name as being equivalent to the IBM brand name. They have five years to do so -- an eternity in Internet time.

The questions becomes -- will it be successful, or will five years from now people be talking about the "good old days" when IBM made their PCs with quality and usability in mind.

Lenovo is buying a lot of expertise for their money in this area, so maybe they'll be able to pull it off. Or maybe not. Personally, I'm an Apple guy now for my laptops, so I couldn't really care less :).

Yaz.

Re:Get a Gateway

[dextroz]

If you've bought other stuff in the US - especially plastic and 'die-cast' metal good in the US - most of them are (coincidentally) Chinese made and are chintzy compared to what you'd have got 20 years ago.

Don't believe me? Go and have a look at the detail in the dinky cars your kid plays with and then compare that with the ones you played with as a kid.

More importantly, observer the radiator and the doors. You'll know what I am talking about.

PS Not trying to be racist here, just giving an observation over how saving a little money here and there really hits on things ultimately.

Re:Get a Gateway

[bshensky]

I don't know about you, but I currently own a Thinkpad T22 and a Powerbook 17". Plus, I've owned 2 other Thinkpads over the last 7 years.

Quite frankly, my preferences between the two come down to this:

(1) The Powerbook is the better Road Warrior, with better overall thoughtful packaging. I'm productively running all different pieces of Oracle on PPC/OSX, BSD/Unix and Wintel in that square foot. And you really can't underestimate the WOW factor of that snazzy case!

(2) There will NEVER be another notebook brand that has the superb keyboards that the Thinkpads do. Those keyboards make the machine. Between the keyboard and the support network, it's easy to see why Thinkpads are such a consistent number one choice.

I'm glad I have both. Put me on a deserted island with a choice between the two, and I'm liable to hang myself before choose betwen the two.

If Levono is stupid enough to abandon the customer base they just purchased through increasingly inferior products, well, I'll just have to go get myself a job as a greeter at Walmart for the remainder of my days.

Re:Get a Gateway

[Txiasaeia]

Sigh. There's a difference between made in China and designed in China. IBM notebooks have (for the most part) been designed in the US; coincidentally, they are also the most reliable notebooks on the market. Hmm...

Re:Get a Gateway

[dgatwood]

Let's look again.

2. 2. They dont have a "middle" size powerbook. They go from tiny 12 to large 15+. Where is the 14 ?

The 15 is the middle size. Apple also sells a lunch tray version. Don't believe me? Walk into the cafeteria at Apple some time and you'll see what I mean. 17 inches of usable food tray space. :-D

3. What the hell is the deal with the speakers being next to the keyboard ?

Simple. It gives you bass response that doesn't suck. Of course, some might suggest moving the speakers to the screen, but it turns out that clear speakers are neither. :-D

Re:Get a Gateway

[Trackster]

[rant] I agree. I've read most of the posts on this story and most are ignorant accusations that Lenovo will bring down the quality of IBM products....because OMG! they're a CHINESE company.

Yet, if most of these posters took a look under and inside their laptops and even PCs (even the ones with "IBM" stamped on them) they'll likely find big fat "Made in China" stickers.

Folks, China is already the "factory of the world" and for far more than just toys and cloths. Update your mental databases. It's no longer 1980. Toys, apliances, electronics, PCs, car parts, partially assembled automotive units (i.e. suspension) and a host of things you use are made in China and will increasingly be so. In fact, it won't be long (if not already) before many of the cars you drive are entirely built there.

Being that most people who rant about Chinese quality tend to be 'Merkuns it's rather ironic considering the track record of U.S. manufacturing quality (particularly large corporations). Even Korea's Hyundai has surpassed the big 3 automakers in quality. Remember Hyundai? [/rant]

Re:Get a Gateway

[1u3hr]

but I've never heard of Levono so I guess I'll have to start looking for alternatives.

Lenovo. They're a big name (the biggest) in China, used to be called "Legend"; good quality. Obviously a lot of the value of the purchase for them is to get the international IBM brand recognition. And you know that just about 99% of PCs and laptops (including Macs) are made in China or Taiwan?

Re:Get a Gateway

[PantsWearer]

There's a major difference between the "big 3" manufacturers and Toyota and Honda: the "big 3" use union labor. I've worked as a computer tech in a couple of assembly plants and union automotive labor isn't there for quality.

I'm not exactly sure how Chrysler handled their plants after the merger with Daimler. Mercedes plants located in the US were non-union, but Chrysler was prohibited by their union shops to run non-union shops.

I'm not against unions overall, but there are many industries where unions are not necessary anymore. Unions were originally created to keep workers from working extra long hours or overly dangerous jobs for nearly no pay. There are jobs that still need unions since they generally get paid dirt for professional level work. And then there's the police who probably need a union, but can't have one. Auto workers on the other hand, work to quota and stand around the rest of the day and in some cases get profit sharing no matter the quality of the work they produce.

Reuter's story

[wyldeone]

Reuter's story on this is here.

Re:Reuter's story

[Anonymous Coward]

Dell is slamming this sale. Here's the article:

Dell slams expected IBM-Lenovo deal

Here is a quote I love from the article:

Dell attributed his competitors' problems to outsourcing.

"It's been a long time since our leading competitors actually made a computer," he said. "They have outsourced manufacturing computers a long time ago, but Dell continues to invest heavily in the manufacturing and design of computers."

At least Dell doesn't think outsourcing is all it's cracked up to be. Even seems to think it caused IBM's downfall in the market was because of this.

Re:Reuter's story

[Txiasaeia]

"At least Dell doesn't think outsourcing is all it's cracked up to be. Even seems to think it caused IBM's downfall in the market was because of this."

And yet, Dell's tech support is in India, whereas IBM's tech support is in the US. Hmm...

Re:Reuter's story

[Skuld-Chan]

Actually IBM has a lot of call centers in both countries - do a search on google and you'll find plenty of articles like this one > http://www.technewsworld.com/story/33346.html.

IBM doesn't just run call centers for their tech support on their own products. They used to do all the helpdesk support for Nortel a long time ago for instance (note: I only know this because while working at Stream for a totally different contract a customer incisted I stay on the line while they call their help desk involving a printer problem with the product I did support)

Re:Reuter's story

[Ravnen]

And yet, Dell's tech support is in India, whereas IBM's tech support is in the US. Hmm...

I don't know if it's the same thing, but the link in the parent post says this:

Dell has some first-hand experience in the problems that can accompany offshoring. A year ago the company moved customer support operations for its Optiplex desktops and Latitude notebooks back to the U.S. after corporate customers complained about the quality of service they were receiving from international facilities.

Re:Reuter's story

[YetAnotherAnonymousC]

"It's been a long time since our leading competitors actually made a computer," he said. "They have outsourced manufacturing computers a long time ago, but Dell continues to invest heavily in the manufacturing and design of computers."

I find this enormously funny.
Dell-speak translation:
IBM designs their own computers, and builds many of the parts, but has others actually assemble the parts. Dell finds people who build design and build computers and parts (often IBM, in fact), buys the parts and designs ("investing...") and then assembles them into a computer. The places where Dell "invests" in the design is in a snazzy Dell bezelplate, or shrinking the printer cartridge size to better rip off the consumer.

Re:Reuter's story

[rah1420]

"It's been a long time since our leading competitors actually made a computer"

Last time I cracked open a Dell it was when my daughter accidentally dumped Progresso Chicken Noodle Soup into her keyboard. I found standoffs and little plastic parts Superglued in place on her ostensibly new Dell LT.

Ever since then I've taken Dell computer assembly practices with a HUGE grain of salt.

Quality

[splitretina]

Does anyone know anything about levono? I love my thinkpad and would hate for the new ones over the years to fall off in quality.

Re:Quality

[liangzai]

Try http://www.lenovogrp.com/ (or http://www.lenovo.cn/ if you know Chinese). I think Thinkpad and other IBM gadgets will decrease as much in quality under Lenovo as Volvo has decreased in quality under Ford's oppressive measures (or Saab has under GM's). It's just a transaction of money, estate and control, the quality will depend on wise management, regardless where the production is.

Re:Quality

[ilyanep]

I can make another metaphor : Symantec has definately killed Norton. The suite they offer now (2005) stinks, but I want to avoid going into too much detail.

Aside from being chinese (no offense to any out there), Lenovo is a different company which doesn't share the original company's viewpoints. This has happened time and time again, this won't be an exception.

Re:Quality

[UniverseIsADoughnut]

"I think Thinkpad and other IBM gadgets will decrease as much in quality under Lenovo as Volvo has decreased in quality under Ford's"

So quality is going to go massively up, and the computers will become very trendy and liked instead of mocked by the masses? Sales will increase, and people won't think of their products as boxes anymore.

Gee this is horrible.

Re:Quality

[quarkscat]

This story reminds me (okay, so I am long in
tooth) of Kaypro (back in the day). They
announced a new "transportable" with a lot of
cool new features way too early -- it destroyed
their current H/W sales as people held onto
their money until the new products arrived.
The drop in sales destroyed the company.

I can imagine that corporate buyers are either
rushing to purchase the last remaining stock
of IBM's laptops & workstations, or are quietly
kicking themselves for believing that old adage
that "nobody gets fired for buying IBM", and
now looking at Dell and HP as the alternative
vendors of choice.

Re:Quality

[metlin]

You know, we have folks from NASA who frequently give presentations on various cool technology stuff and the like.

I noticed that in all the shuttlecraft/space station pics, the systems used for controlling various things were all IBM laptops.

ThinkPads all the way, no question. I asked the guy about it and his response was, "It's robust, it's reliable and it's IBM".

I'm quite certain that Lenova couldn't *ever* have that kind of a brand-name.

IBM has grown to earn the respect, and while Lenova may buy IBM's business, they will not buy IBM's respect. That needs to be proved and earned.

Apex buys Sony next?

[Fubar411]

Wow, hard to think the IBM Thinkpad I'm typing on now will be made by the Wal-Mart of computer manufacturers. The FA mentions that Lenovo doesn't spend much on R&D, doubtful they would make drives that survive the 6' fall IBMs do. In my circles, IBM laptops are known as "expensive", "tought", and "secure". Especially since many of them come with BIOS locked biometrics. Sad to see this happen, but I guess the PC market is going commododity.

Re:Apex buys Sony next?

[anactofgod]

Odd already are that the laptop you are typign on was not manufactured by IBM, but by some contract manufacturer in Asia. IBM has been divesting itself of PC and laptop manufacturing facilities for quite a while now.

In fact, if one actually read the article, one would see that point being made in...oh...about the thirteenth paragraph. One would also realize that, inspite of the headline and /. synopsis, it's not an actual "sale" of the PC unit. IBM is forming a joint venture with Lenovo, which means that IBM will continue to be involved in the PCs and Thinkpad business for at least a few years.

Re:Apex buys Sony next?

[UniverseIsADoughnut]

I think you are looking at this wrong like so many others. They bought IBMs PC devision, that will Lenovo will basicly become IBM PC devision. They will take up the quality IBM has, not bring down IBMs quality.

They did this to gain all the quality. Besides things like thinkpads arn't even designed much by IBM, it's some asian company that makes them for most everyone else.

I expect them to be much like when IBM spun off the printer devision which became lexmark. Lenovo will re-orginize, probably just scrap much of what they had. Probably rename under a new catchy name, and grow to be a big time player. People just don't think IBM when it comes to home computers anymore. They will go after that again which IBM has long since ditched.

I guess thing will now be listed as "Lenovo Compatible"

Re:Apex buys Sony next?

[iocat]

Actually, upon closely RTFA, they *bought* the Think trademarks -- "ThinkPad" is now theirs. But they can use "IBM" on them for five years before they have to start calling them something else. I'd bet $500 easy that the name of the company becomes "Think" or "ThinkPad" or some derivitive name w/i the five years.

Re:Apex buys Sony next?

[Lariano]

The hard drives in the ThinkPad have for the last year been manufactured by another department IBM sold off, now called Hitachi Global Storage Technologies http://www.hitachigst.com/. These are and will continue to be developed independently from anything Lenovo does, and it's more than likely that Lenovo will continue using these hard drives. So the Lenovo ThinkPads should support about the same falling distances as the ones by IBM.

Re:lenovoepad?

[SnowZero]

I'm banking on "Thoughtpad". They can use it after the 5 years is up on using the Think brand, and it carries a convenient past tense.

Will miss not having a T1000 eventually...

PS/2

[m93]

Gee, I guess that whole PS/2 thing WAS a bad idea after all........

driver and support site?

[mrbcs]

I'm curious what effect this will have on the support website. I thought IBM did a great job of fixing their driver site in the last couple years.

I only buy thinkpads for my own use... I like em better than anything else and they've been very stable and durable for me.

Re:So wait.

[spike hay]

Yeah, they are only an extremely distant third to Dell and Compaq. Their Power5-based servers are proving to be extremely profitable. And the IBM CPU based game consoles coming up will help matters greatly.

Most interesting "wild speculation"

[Coryoth]

The most interesting bizarre theory behind some of this was posed at The Register. They claim that IBM may be interested in buying or allying with Apple. It makes some sense, Apple are certainly one of the big vendors for IBM's Power chips, and it would give them a nice UNIX desktop to push, while giving Apple a little more "corporate credibility" and give them a chance to creep into the business desktop market more.

Realistically though, I just don't quite see it. I don't think Apple could quite take the image hit that being owned by IBM would entail, nor do I think the gains would really suit IBM that well. Perhaps some sort of closer alliance may result, but I would expect that to be about as far as things go. Still, and interesting but of completely wild speculation.

Jedidiah.

Re:Most interesting "wild speculation"

[somethinghollow]

I'm going with alliance. It'd be stupid for Apple to be assimilated by IBM when Apple is on the rise and not appearing to peak any time soon. Besides, they've already partnered with IBM for chips. Why not let IBM help Apple sell more computers so that they can sell more chips to put in those machines. That seems perfectly logical. IBM, IMHO, is getting a bit of an old-and-crusty feel to it. It'd do them some good to get a little more hip. Besides, all the Unix/Linux experience they have could help Apple, and eventually help the open source through Darwin.

Re:Most interesting "wild speculation"

[stevesliva]

I think it's dumb speculation. IBM is focusing-- as it always has-- on business. It's divesting personal computers that have become consumer commodities. Why would it purchase a company whose stock has risen a huge amount based entirely on the profits of a personal music player?

If not for the stock premium caused by the iPod it might make sense to buy a company known for its superior product design, as IBM focuses on proving more value (and charging higher premiums for it) to clients than the commodities themselves provide, but here it is selling a well-regarded laptop line for a bargain... why would it turn around and by one for a huge premium?

Re:Most interesting "wild speculation"

[mnmn]

Your comment suddenly made me realize something.

Add up these facts:

Apple is powerpc

IBM is powerpc

Apple is OSX based on FreeBSD

IBM spent $1 bil on Linux last year

Apple competes with Intel and Microsoft

IBM competes with Intel and Microsoft

Microsofts apps depend on Intel (Wintel)

Intel Sales depend on Microsoft OS and apps

Intel is a monopoly (they still are, declining)

Microsoft is a monopoly

IBM and Apple are losers in these monopolies

IBM has been releasing apps for Linux on pSeries

Apple has been pushing apps for UNIX on PPC

IBM supports OSS community, increasing free apps

Free apps can be compiled on any arch.

Making sense now?

No?

Say Linux goes a bit more mainstream, Opensource apps increase in numbers, especially for powerpc, both IBM and Apple win, Intel and Microsoft lose.

This is more true of servers than desktops... for now. IBM can take the server share (cheapest pseries now is $6k, with very few under $10k, Apple the desktop share). They both have been depending more and more on opensourced apps and OSes, and have had past alliances (PReP machines), that worked. Both created successful computer lines and are confident in doing the same again. Both have been highly marginalized by Wintel Inc.

IBM is pretty much getting rid of x86 on desktops, keeping only the x86 on servers. With AMD as a good option, they really dont need Intel for anything now, havent been relying on Microsoft either for much beside xSeries OSes (online catalog shows SLES and Redhat AS as options alongside Win2003).

The whole industry, at least the bigger players are moving away from the wintel alliance, and we can expect a showdown. Wintel wants the entire market to itself, everyones threatened. Sun, SGI, Novell have seen the light at the end of the tunnel, no reason for them not to join. Apple and IBM must do something while they still have the kick.

Tell me if I'm way off my base here. I have a premonition of a tech sector mortal kombat with entire vertical architectures against each other, x86+win32 and other arches+other oses. I see IBM moving away from x86, at least from Intel... Athlon64 is too good a deal to turn down.

Am I wrong or is the Intel+Microsoft alliance just not that threatening?

Re:Most interesting "wild speculation"

[Infonaut]

I'm with you, Coryoth. IBM and Apple are doing fine in their current relationship. Apple uses IBM chips. IBM pushes businesses to realize that Windows isn't the only OS on the block, which benefits Apple.

But IBM and Apple are both smart enough to realize that merging two companies with their own unique cultures is a difficult, sometimes impossible task. Bigger is not always better, as IBM learned during their dark years. A loose alliance based on mutual respect is likely far better for both companies.

Rumors about Apple mating with other companies have been around as long as the Mac has existed. Sun, Disney, Sony, IBM - I wonder who it'll be on the next iteration of the rumor mill.

Re:Most interesting "wild speculation"

[thogard]

I would love to see an IBM badged mac just to give a new meaning to the phrase "IBM compatible computer"

Re:Most interesting "wild speculation"

[Anonymous Coward]

IBM and Intel are more friends than enemies. Looking at the future roadmaps for their x86 servers, they are all Intel based.

Huh?

[gremlins]

In the short term I guess using the IBM and Thinkpad name will help them out but in the long term they aren't going to do very well if they don't get people to remember their name with the IBM quality. On a side note I hope that IBM really does merge with Apple because after this deal I think I am not going to get another Thinkpad and start buying Powerbooks instead.

I won't be the first

[Tragek]

And I won't be the last to say that this is an end to an era, at least for the thinkpad series. Stories of tech confrences and the sea of black notebooks are legendary.

Design is set Im sure

[hypermike]

I am posistive the design will stay the same. I have a first generation thinkpad and its identical to the new ones except its about 2 inches thicker. The same parts will go in and the same subtle changes like the improved trackpoint will appear. The only think this will cause is lower prices. I understand the jacked up prices on desktops servers but the thinkpads need to come down a little. With Leveno in charge maybe they will design the ultimate HOME laptop like every other company out there, IBM has kept the line too business oriented. Give me my 128mb Graphics Thinkpad! (I need to play warcraft in various locations lol) I currently play on a dell inspiron 1100 with 64 mb shared, 256 total in machine and a 2ghz celeron processor. Long story short its slowly making me sterile its sooo hot. Thinkpads are always nice a cool, well more cool anyway. Ill stop rambling now.

Re:What about workstations?

[sapbasisnerd]

My understanding is that the current Intellistations are made by the server division rather than the PC division (which makes sense as they are basically just servers with high end graphics cards) so they will not go to with this deal.

Re:going going gone... so sad

[spike hay]

Do Dell computers use Dellium 4 CPUs and Dell RAM?

No, they pretty much just assemble the computers from components. Pretty much the same components that any decent quality manufacturer uses.

Levono, Lenovo, same thing?

[wasted]

...IBM will keep an 18.9 percent stake in Levono. Lenovo will pay...

I was going to make a smart alec remark, but the first return on a Google search of Levono leads to a site for a Lenovo product.

Re:going going gone... so sad

[phalse phace]

Sorry, but Dell does not manufacture their own PCs.

I'll help you pronouce it

[Anonymous Coward]

eye bee em

Changing IBM's relationship with MS

[PornMaster]

I can see how this will put IBM in quite a different position with regards to its relationship with Microsoft... while I'm sure that their x86 servers will still be available with Windows, we're looking at a completely different scale of total revenue IBM will be "forced" into with Microsoft, and perhaps an ability to wean themselves off Windows and focus more on AIX and Novell (err, I mean SuSE) Linux.

I wonder if they'll start marketing computers

[Nine Tenths of The W]

With the Dragon chip

Something is fishy here

[Spiked_Three]

I've been around the business world for a while now (25+ years) and this just doesn't seem right. I have bought businesses, been working for businesses that got bought etc - and deals like this take 6 months to a year minimum. It seems like it was last week that the news read 'IBM has decided to sell'. Was that story completely off timing or is there something else going on?
Anyone know the inside scoop? Assuming it was really 6 months ago IBM started shopping for a buyer there has to be a lot more to the story.

Freedom from MS

[bstadil]

The main thing IBM is getting is freedom from Microsoft. As long as they had the PC line they couldn't totally piss off MS as they could raise the price on Windows to the Normal level. (MS have done this once)

This would give them a $50-75 cost disadvantage versus everyone else. Now they can support Linux 100% and leverage the Power / grid architecture into other areas. Incl. making reference designs available to OEMs

Re:Freedom from MS

[T-Ranger]

This is a question of debate, and perspective. MSFT has a higher market cap then does IBM. But for virtually any other business metric, IBM is on top. More revenue, more profit, more employees, more locations. Bigger IP porfolio. Far, far, more lines of products.

In the desktop PC world, Microsoft may be able to push around anyone, including IBM. Anywhere else, IBM is king. This whole sale is due to the very low margins on desktop PCs, I read somewhere it only brought in about $75mil/year in profits -- far to little for IBM to bother with. If IBM starts a serious Linux push -- they already have the technology in place, just marketing time now (.. the same OS, on your departmental server to your mainframe, backed by IBM...) then they would undoubtably piss of Microsoft. And that very slim margin could evaporate overnight.

Re:Can someone please clear this up?

[stevesliva]

This past year IBM's Technology group and their Systems group were merged into the "Systems & Technology Group" (yeah, I know, astoundingly creative) to get better synergy between the semiconductor (technology) and server (systems) parts of the business. The PC division being sold definitely does not include the technology/chips group, whose assets alone greatly exceed $1.25B

Protip:

[sockonafish]

Buy Apple stock now.

IBM is now fully committed to the PowerPC platform.

Re:Thinkpads

[Cobalt Jacket]

I have a ThinkPad T40p. One day, I dumped a whole glass of water on it. The ThinkPad kept running. I turned it off and removed the battery and disassembled it to dry it out. That's when I realized that the ThinkPad had designed-in channels for liquid to flow. It avoids any of the sensitive parts. I just used some paper towels to dab out the water, and let the keyboard dry. Powered it on and it worked like a champ.

IBM Workers

[Ween]

I live near the IBM PC Division Headquarters (RTP North Carolina). On the news the General Manager of that division (Fran Somebody) said that since there was very little overlap between the two companies that most of the current employees will remain on. She went on to say that her and her entire management team would remain. Hopefully this bodes well for the quality.. at least in the short term until its decided where money could be saved at. I would suspect that eventually those jobs would be moved overseas where the labor is cheaper. The lady also said that the deal wouldnt be final until 2Q 2005.

Re:IBM Workers

[OneFix]

But will the new company take over all of the leased buildings that IBM has in RTP...what about all the contractors (IBM's workforce is made up of about 80-90% contractors)...what about IGS...IGS currently does work for PSG (specifically on the web site front...most of that has moved to IBM India now...but Lenovo will obviously have their own web team...

Think of it this way...another company has just bought your division...are you going to tell all of your employees that their jobs may be in jeopardy and potentially loose the deal by having a mass exodus of talent as well as all of the bad press it would generate...

And IBM being made up of mostly contractors is exactly how this will pan out. In the news, IBM won't be laying off thousands of employees, it will be companies like Ciber and CTG...And it won't even be that way...IBM and Lenovo will simply not renew contracts...contracts are all temporary...regardless of anything that anyone at IBM would have you belive...

Re:IBM Workers

[Anonymous Coward]

80-90% contractors? It was never close to that high, at least in PCD. And it's been quite a lot lower for several years--they hired a bunch and laid off quite a lot of the rest about 2 1/2 years ago. 10-15% would be a more realiztic figure, at least when I left 6 months ago. That's just a ridiculous figure to be quoting.

On the IGS comment, first of all, you're right--IGS has moved most of their development/support for PCD to India or Mexico. And don't cry for IGS--PCD won't. They provided less-than-their-best service to internal clients for the same money. Frankly, IGS would RATHER deploy their best people to external clients that bring in "green dollars" rather than internal "blue dollars."

Again, your irrational and flat-out incotrrect assertion that "everyone's a contractor!" drives your erroneous conclusion. Ain't true, ain't close to true.

As to the conspiracy theory "they won't tell people for fear of bad press...", well, IBM's done this before, so there's something like a track record here--2 years ago when they sold the hard disk business off. Frankly, this is a pretty good case study on how the PCD spinoff will go. Oh, and by the way, the "we're selling off the hard drive business because we don't make any money on it" was the writing on the wall for PCD employess "Hey, we don't make any real profit on our division either...."

By the way, the woman quoted in the thread parent is Fran O'Sullivan, and she is indeed the general manager of the Personal Computing Division.

The IBM game

[clem.dickey]

1. Merges divisions A and B to create "synergy."
2. Split the AB divison to improve "focus."
3. Repeat steps 1 through 3.

ThinkPad design is in Japan

[shanen]

No, the manufacturing of ThinkPads is distributed to various companies (though I think some are made in Japan), but all of the design has been done in Japan up to now. Certain subsystems have drawn on work done elsewhere, mostly research, but the designs and testing are done here (since I'm located in that selfsame part of Japan).

Anyway, it's a funny world. Low-margin commodity businesses are good for the people and companies that get to buy the cheap commodities, but bad for the companies that have to produce the commodities and suffer from the competition. Stock price uber alles, you know.

However once someone gains solid control of the commodity market, then heaven help everyone, but that's long-term thinking, and very out of fashion.

Don't forget Apple

[mrklin]

Apple provides international warranty and support.

And neither Toshiba's nor IBM's machines run BSD/OS X/Linux as stylish as Apple!

See http://www.apple.com/legal/warranty/hardware.html

Not really rocket science

[tsangc]

I honestly don't think this has anything to do with merging with Apple (a stupid rumour) or for that matter, even leveraging Linux over Windows. It's really just shedding an expensive division, saving money and increasing profitability.

It's explained within the first page of the article:

"If it goes through, the deal would allow IBM to continue its shift from selling so-called commodity products toward selling services, software and high-end computers. Although it helped make PCs a global phenomenon, IBM makes little profit from PCs and often loses money, despite the fact that it's an $11 billion business for the company."

IBM's profits come from consulting and integration services, not from selling desktop machines. The price of Windows, Linux or otherwise, or what strategy they push on the desktop is not a big deal in this case.

What I think it comes down to is they're holding onto a division that is building commodity boxes and that's a tough game with competition like Dell. With ODM's and OEM's doing more and more of the design work these days, really all IBM needs is to pitch the stuff, which isn't affected by the sale of this division. The consulting and sales groups already push the hardware in major deals.

If you read the article, the market is slowing:

"That period will see average annual unit shipments slow to 5.7 percent and revenue growth subside to 2 percent, Gartner predicted."

Hence, you're not going to see any more profits from an area which already has razor thin margins. Give the business to the Chinese, since they know how to reduce costs. The biggest problem Asian manufacturers have today is not engineering skill or manufacturing capability. It's branding and marketing. Lenovo bought the IBM brand for five years and it's worth every penny.

It's pretty obvious the American part of the company will be cut, probably because they're expensive:

"It is going to take quite a long time to consummate, and the only way I see this running properly is that if a lot of blood is shed at IBM PC."

The desktops are already made and built by a Chinese firm (as noted in the article) while the money in laptops is made by large corporate sales contracts, not individual units.

In the end, I think it's just getting rid of an unprofitable part of the business, not some super strategic technology move.

Re:Not really rocket science

[bluesword]

Kirk: My God, Bones, what have I done?

McCoy: What you had to do. What you always do. Turn death into a fighting chance to live.

Sad news?

[Richard_J_N]

This seems to me, as a long time Thinkpad owner to be sad. IBM always used to produce the best products by a large margin, but the quality seems to be falling already. For example, they've lost the confidence to ship their best trackpoint configuration - one is compelled to purchase a laptop including the ghastful touchpad, and with the buttons in a row rather than 2+1 (therefore making it impossible to have both emulated 3rd button + emulated scroll wheel).

Down with Big Brother!

[Xenex]

IBM stopped making personal computer before Apple. I'm sure there's some kind of ironic victory here somewhere...

Re:Sucks!

[808140]

I can't believe this crap got modded insightful. It's quite clear that Alomex has no personal experience whatsoever with Lenovo. Lenovo (Legend, Lianxiang) is a very high quality company, that has managed to essentially monopolize much of Asia's laptop and desktop PC market for quite sometime now.

The reason you don't know much about them if you live outside of the greater China area is not because they're of poor quality, it's because the guy who runs the company has his head screwed on straight. I saw a very interesting interview with him when I was in Hong Kong a few months ago, where he was asked if he was going to take his products global. He said that it was definitely on his mind, but that he wanted to develop a strong lead in China, which he perceives as the 21st century's major market, before moving into Europe and the US.

Lenovo laptops are of high quality make and are priced very competitively. They're very widely regarded here (Shanghai) and my personal experience with them is that they're put together very well, better than say, Sony laptops.

The Chairman Mao dig is just about the stupidest thing I've ever heard. All it does is demonstrate that Alomex has never been to China and knows diddly squat about it (and if that's not the case, then he's a troll, plain and simple.) Chairman Mao has essentially no credibility in China (which isn't surprising at all) and while the CCP may continue to give him face in certain respects (it's not considered polite to speak ill of the dead here) any marketing rep worth his snuff knows that it's absolute suicide to try to connect your product with Mao and come out on top. The common people (especially in the demographic that buys computers) were mostly pretty badly burnt by the Cultural revolution and as that wasn't very long ago it remains fresh in people's minds.

China is, at this point, anything but communist. Anyone that makes this accusation is just showing himself to be a bubbling moron.

Lenovo, in particular, is not a state owned company (there are very few of these anymore, and the Chinese government is dumping them/privatizing them as quickly as they possibly can), it's profitable, successful, and international.

With their local connections, they will do well. I own a Thinkpad X40 and I personally am not at all concerned that quality will drop. Thinkpads are expensive machines, and if Lenovo keeps them at their current price, they'll be able to make an absolute crapload of money without dropping the quality at all, based on their current offerings.

This China trolling from desperate Americans worried about losing their economic and technological dominance in the near future needs to stop. I'm American, and let me tell you, no amount of whining is going to stop the PRC. The sleeping dragon is waking and the world, as Napoleon predicted, is trembling.

IBM PC is not IBM Research

[ciphertext]

IBM is not selling its research division. In acutality it spends a great deal on research. It boasts the linkage between its consulting practice (BCS) with top notch research facilities (IBM Research) through the "on demand" methodology. To date, there isn't an existing consulting company that has the same connections. Deloitte Consulting, BearingPoint, Accenture, and Cap Gemini all have no equivalent to the IBM Research branch. Don't give up on big blue yet. They are simply moving into the "idea economy" full steam.

but what ? Are you being racist ?

[anti-NAT]

Why does the Chinese ownership of the company matter, as long as the products have the same quality and support that IBM provided ?

Saying the products won't be the same quality just because the company is Chinese owned is like saying all terrorists are Arabs ... which suggests that Timothy McVeigh must have been one of those rare albino Arabs.

Becoming a player in China

[hrvatska]

A NY Times article makes the point that an important factor in this deal was IBM's desire to better position itself in China. I thought it was kind of interesting that the chief executive of Lenovo will be Stephen M. Ward Jr., currently an I.B.M. senior vice president in charge of the PC business. Lenovo's current chief and president, Yang Yuanqing, will become Lenovo's chairman.

Stock market responce.

[eadint]

I was hoing that IBM stocks would go up but it looks like the stock market isnt too keen about this sale. stocks are down a few points for IBM

Here I come Apple

[doormat]

IBM Thinkpads were the only top-tier notebook in the US, and now all thats left that I would like is an Apple iBook.

Wait so your saying?

[skids]

That they blew their money. As in "Big Blew"? ...ugh. That one hurt me as much as it hurt you. Sorry.

How do you spell 'driver download' in Mandarin?

[j.leidner]

Now we all need to download new drivers from www.thinkpad.cn...

Re:Get a Chinese Apple

[Bugpowda]

Yeah no doubt. Forget that Chinese plastic crap...

Wait a sec, what's this sticker on my 12" Al Powerbook? And its battery, and the power adapter, and -gasp- the VGA dongle!?

"Designed in Cupertino. Made in China"

Where did you get your income numbers?

[xswl0931]

Not sure where you are pulling your numbers from, but if you check http://finance.yahoo.com/q/is?s=IBM&annual and http://finance.yahoo.com/q/is?s=MSFT&annual and look at the most recent annual report, IBM had much more revenue ($89 bil vs $37 bil), and slightly more gross profit ($33 bil vs $30 bil), but lower net income ($7.6 bil vs $8.2 bil) meaning that MSFT's margins are much higher.

because it was pretty damn good

[RMH101]

IBM is a bit of a curate's egg. IBM global services suck ass royally in every conceivable way, but IBM hardware is actually Very Good Indeed - right down to desktop/laptop components. Sure, they all look like they were designed by Darth Vader on an off day but build quality is excellent, and their service is second to none - we've had field users from the UK out in Eastern Europe with a dying Thinkpad, and the UK warranty's covered them getting it fixed abroad by an IBM tech.
We were using their S50 desktops recently and discovered a bug relating to serial comms: their technical third line guys WROTE US A NEW BIOS UPDATE within a week to fix the problem after we sent them a sample peripheral we were having trouble with.
It's a little like HP selling off the printer business: you can't help feeling they're getting rid of some of the things they do best, leaving just service industry components of their business behind.

IBM official announcement ?

[yorugua]

http://www.pc.ibm.com/ww/announcement.html

A few words from it:

This week two leading PC companies announce their intent to create a single global PC powerhouse.
IBM's Personal Computing Division, maker of the IBM ThinkPad® and the world's leader in enterprise PC innovation, will join forces with Lenovo, the most well-known brand in the world's fastest-growing PC marketplace - China.

The result will be a new company, the 3rd largest PC company in the world*, to be headquartered in New York.
Driven by innovation and customer service, this new entity will have the global depth, heritage, and scale to set new standards in the PC industry.
New standards not just for quality, support and cutting-edge innovation, but for value and choice for PC customers around the globe.

False Advertising in the Future?

[Andy_R]

I know that if I paid a premium to buy a genuine IBM ThinkPad in 3 or 4 years time, I'd be mightily annoyed to discover it's actually a Levono product that has nothing to do with IBM.

IBM might be allowing Levono to use the names, but will consumers and the courts allow it too?

Re:False Advertising in the Future?

[Anita Coney]

It's not false advertising for a company to sell its trademark. It happens all the time. Have you seen all the Harley Davison crap out there? It's pretty obvious that the owners of Harley Davison treats its trademark like most people treat toilet paper.

And besides, IBM has not made its own computers for years. They're all made in China by third parties. IBM merely slaps its name on them. As does Dell, HP, etc. Nothing is really changing.

Re:Get a Chinese Apple

[curious.corn]

I'll chime in, my powerbook has gone through 3 power supplies; one actually shorted on the DC line because of the cheap wire thus melting the whole device in a characteristic smelly (toxic?) plume. The battery pack latch of the same powerbook weared off causing it to jam if certain precautions aren't taken. The DVD drive sometimes makes some nasty noises, likely the full-stroke sensor doesn't work and the stepper motor to laser caddy gear skips; it hasn't given the ghost yet but I'm wary of Warner DVDs that tend to trigger this behaviour. Unfortunately the fans are starting to make funny noises. It doesn't suffer from flaky paint but other do and let's not forget the logic board fusses on the iBook and the battery problems of the Al powerbooks. Granted, it'll be 2 years old in 2 weeks and I still enjoy it as the first day (try that on a w2k Dell!) but powerbooks aren't some mithical Andruil, just another mass produced device.

Now, to be on topic: all these problems can be eventually reduced to lapses in an otherwise good quality control process; certainly better than Dell's or Medion's but still improvable. Now, I'm not saying that it's the chineses' fault, I've seen western made gsm phones crap out like flies (and don't forget good 'ol crappy FIAT... I'm italian, I see these poor jokes every day) but sometimes they do cut a corner too much over there...

Unfortunately my father's 40 yrs old AKAI amp was built with other quality standards in mind. Today it would be overkill to embed such high durability in products we have accustomed to consider consumables; this point is important and it's both our fault and the corps'. We, as consumers, enjoy a continuous turnover of our toys and them, the corps, are quite happy to make products that "help us" take the decision it's time to buy a new one.

Back on my unlucky powerbook... the power brick... what fool would save the 1 cent for a short guard and get to change, free of charge, thousands of blown supplies? This is a design flaw, a mistake done in Cupertino... shure, the cheap chinese cable is the initial cause, but Apple could have reconditioned rather than landfilling if not for the missing transistor (no, not a fuse, just a transistor wired up to shut down the supply if the draw is too high...), tsk... tsk...

IBM won't buy Apple if it has to bid against...

[unfortunateson]

HP.

1) Apple's stock price is inflated because of the iPod
2) HP won't want to give up their marketing of the iPod, or the perceived loss of control if IBM snatches up Apple
3) A bidding war between HP and IBM for the whole of Apple's biz would benefit neither, only Apple shareholders.

So my conclusion is that IBM isn't going to buy up Apple, unless it was silly enough to have a deal planned to spin off the iPod/iTunes unit to HP, and that's quite a cash cow to give up.

The biggest side benefit of that might be that it could diffuse the Apple Corp. (Beatles) lawsuit, if Apple Computer is no longer the owner of a music-related product. A spinoff might be the only way to end that suit (Apple or whoever owns them would still have to cough up a big chunk of bullion to Yoko and Sir Paul, but it would end the long-term problems).