IBM Said to Be Leaving the PC Business

The company that has been synonymous with the term “PC” since it was first created is
getting out of the PC business.

According to a report in the New York Times, IBM is in talks
with China’s largest maker of personal computers which currently operates under the name
Lenovo. The company, which trades on the Hong Kong stock exchange, previously was known as
Legend. Lenovo, according to the Times report, is no stranger to doing business with IBM and
has been an IBM distributor since 1984.

The Times cited unnamed sources for its report.

In January 2003,
IBM began its retreat from the PC market by outsourcing manufacturing to Sanmina-SCI. At
that time reported that, as a result of that deal (and one with Solectron),
more than two-thirds of IBM’s Intel-based product manufacturing has been outsourced.

IBM’s share of the market it created back in 1981 has steadily dwindled over the years. In
a recent Gartner research
report on PC sales, IBM was reported to hold only 5.6 percent of the market, placing it a
distant third behind Dell at 16.8 percent and HP at 15 percent. Out of IBM’s annual revenue
of $92 billion, the PC business represents approximately 12 percent.

Gartner’s recent “Predicts 2005: PC Technologies Due for Transition” reports three of the Top 10 PC vendors wouldn’t be around to celebrate the holidays in 2007 because of
reduced profits and growth. The research firm noted reduced growth rates and profit margins as
the drivers towards greater PC vendor consolidation. Gartner has forecast that PC unit growth
will be halved from its 2003 to 2005 growth rate of 11.3 percent for 2006 to 2008 down to 5.7 percent.

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