Wednesday, December 15, 2004

IBM's sale of PC division to Lenovo ...

Don't know how many of you read "I, Cringley the Pulpit". I'm more or less a regular reader and Robert sure knows how to give a different perspective to something of importance happening in the world. Its a must read for all those who want to get a "different" perspective to "tech" things happening around.

BTW, this week's article on IBM's sale of PC division to Lenovo (the biggest Chinese PC company) has him giving yet another interesting dimension to the whole thing.

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Okay, so IBM didn't want to make HP an even bigger competitor, then why not sell to a big Japanese player like NEC, which after all paid more than $1.8 billion for Packard Bell, of all things. The dollar is down, the yen is up, and the cost of corporate borrowing in Japan is almost free, so why didn't IBM sell to a Japanese company? Or a European one? Or even another American company? Gateway paid more cash for e-Machines than Lenovo is paying for IBM; Wouldn't Ted Waitt have ponied-up big bucks for the use of the IBM brand? Of course he would have.

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Doing business in China always requires having a partner. You don't just set up an IBM China and start selling stuff. You find a local partner company and move into the market together. Now IBM's partner will be Lenovo, the biggest, baddest PC maker in China, which is a good partner to have. IBM not only has its Chinese partner, it has a substantial equity position in that partner as a result of this transaction. That's unique as far as I know. Chinese-U.S. corporate partnerships aren't always the easiest marriages, but in this one, IBM actually has a vote. It also got Lenovo to move its global headquarters to the U.S. and accept an American CEO and 10,000 U.S. employees, which will have to change the way Lenovo runs its global business.

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Read the complete article here.

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