NYT: IBM PC Division Sold To Advance China's Goals

theodp writes "Back in 2005, Wharton's Michael Useem speculated that IBM's sale of its PC Division to Lenovo was more about ingratiating Big Blue with the Chinese government than getting top dollar for the assets. 'Government relationships are key in China,' Useem explained. Now, a NY Times article on outgoing IBM CEO Samuel J. Palmisano seems to confirm that Useem's analysis was spot-on. From the NYT article: 'In 2004, I.B.M. sold its PC business to Lenovo of China. Mr. Palmisano says he deflected overtures from Dell and private equity firms, preferring the sale to a company in China for strategic reasons: the Chinese government wants its corporations to expand globally, and by aiding that national goal, I.B.M. enhanced its stature in the lucrative Chinese market, where the government still steers business.'"

Comments

One wonders if IBM got it's money's worth over all

[Karmashock]

They're implying that IBM took less money for it's asset to curry favor with the chinese. That would only make sense if IBM got more money then the difference between the two payments over time as a result of that good will.

Has that happened? I don't know... I think American business might have been too brash in it's oriental investments. Most of them seem to be backfiring in alarming ways. We seem to have taught our chinese business contacts just well enough to start competing with us directly where before our technological edge made that impossible.

In any case, it seems like many of the US multinationals have woken up to the issue. We'll see what happens.

Ouch!

[CuteSteveJobs]

Palmisano was not well liked within IBM. He was after all the guy who told IBM's US employees they could take a job in the third-world at third-world wages or stay in the US and get sacked. For this Palmisano will be forever despised.

http://www.infoworld.com/d/the-industry-standard/ibms-palmisano-techs-slumdog-millionaire-257

Sure, the business press has wet dreams about Palmisano and Gerstner who picked him as his successor:

http://www.forbes.com/2011/01/03/forbes-india-person-of-the-year-sam-palisan-ibm.html

But the truth was really quite ugly. You won't read this in Forbes, but you will read it in - of all places - the reader feedback at Amazon:
It is strangely ironic that, after doing his best to suppress all negative communication within IBM, it should be the reader feedback on amazon.com that alerts Gerstner to what the world at large really thinks of him.

In the last five years, Gerstner has reaped a profit of [$$$] million in the sale of awarded stock options. These stock options were awarded while he held the joint positions of IBM CEO and chairman. During that period, IBM spent [$$$] billion buying back its own stock to drive the price up so that executives could cash out at handsome profits. This is money that could have been spent on developing new products, attracting new talent and honoring promises made to employees and retirees.

Where did all that money come from?

Not from profit growth, which remained flat at about 2 percent per year when you strip out the retirees' pension fund surplus "vapor profits."

It came from selling off large chunks of the company and its assets, laying off tens of thousands of employees and slashing pension and health care benefits for employees and retirees. In 2002 alone, IBM has quietly cut 15,000 jobs. Health benefits, which were promised "free for life," now cost retirees a substantial amount of their pensions. Only one minuscule cost-of-living increase has been awarded pension recipients in the past 11 years.

The greed doesn't stop there. Now, Lou had not only been retained as chairman of the board, he has been awarded a 10-year consulting contract, with fully paid expenses at his previous salary of $2 million a year. These expenses have been conservatively estimated to be $100,000 annually.

Save IBM? More like turning it into just another money grubbing corporation while lining his pockets. I would love to see a rebuttal book. God help us all if Lou's management methods become benchmarks for future corporate leaders.

http://www.amazon.com/Elephants-Dance-Inside-Historic-Turnaround/product-reviews/0060523794/ref=dp_top_cm_cr_acr_txt/185-5256096-7601530?ie=UTF8&showViewpoints=1

Re:One wonders if IBM got it's money's worth over

[evilviper]

GMs marketshare in China is dismal. And on and on.

WTH are you talking about? GM is perhaps the biggest of the China success stories.

"GM sold about 1.83 million vehicles in China last year [versus] 2.07 million cars and trucks in the U.S. But GM, already the leader in China with 13.4% of the market, is still gaining share. GM's market share was 11.3% in 2008."

http://money.cnn.com/2010/01/12/news/companies/gm_us_china_salesrace/index.htm

Re:News Flash: CEOs Think Strategically

[iter8]

My reading of history convinces me that most bad government results from too much government. - Thomas Jefferson

Don't believe everything you read on the internet. - Abraham Lincoln.