IBM PC Unit Saw Three-Year Slide

IBM’s outbound personal computing unit lost $965 million
over the last three years, according to a filing with the Securities and
Exchange Commission (SEC).

In the filing, Big Blue reported net losses of $139 through June 2004, $258
million in 2003, $171 million in 2002 and a total loss of $397 million in
2001 — the year when PC sales were perhaps most stagnant due to an economic

To staunch the flow and focus more tightly on its enterprise business, IBM
agreed to sell its
PC business to Lenovo Group for $1.75 billion. IBM will take an 18.9 percent
stake in Lenovo, the leading PC maker in China.

The Armonk, N.Y., systems vendor addressed the division’s losses in the SEC

“The business has a history of recurring losses, negative working capital
and an accumulated deficit,” IBM said. “The ability to settle obligations as
they come due is dependent on IBM funding the operations on an ongoing

IBM had refrained from issuing specific results for its PC unit in the last
several years, reporting figures for the entire Personal Systems Group
(PSG). In its 2003 annual report, IBM said the PSG group grew revenues 3.1
percent year-over-year and alluded to weaknesses in the mature desktop

“Revenue from mobile personal computers increased due to strong demand and
was offset by lower desktop personal computer revenue,” IBM said in its 2003
report. “The decreased desktop revenue primarily reflects the fact that
increased volume gains were not enough to offset a reduction in price due to
decreasing commodity costs.”

IBM’s PC unit losses came despite the sale of
its NetVista PC manufacturing line to Sanmina-SCI in January 2002.

Reaction to IBM’s sale of its PC unit to Lenovo was mixed when the deal was
announced last month. Analysts speculated
Dell and HP would try to capitalize on IBM’s exodus because Lenovo was
not well established in the West.

While Dell was noncommittal about the sale, HP said it saw the sale as a
distinct opportunity to gain share. Another sampling of analysts said they
feared IBM would upset a lot of people by abandoning its popular ThinkPad
line of notebooks.

A timeline of IBM’s PC efforts may be viewed here.

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