The Register reports that Lenovo is gloating over its purchase of IBM’s PC division and its turnaround efforts, while IBM doesn’t regret pulling out, at all, even going so far as to call the PC dead. Who’s right?
Lenovo. Though IBM was right to get out–but the PC is only as dead as the television. Old media doesn’t go away quickly. Radio was supposed to make newspapers go away, and it’s only now, 90 years later, that newsprint is hurting. The old stuff adapts and evolves and finds new uses. Some people argue that if newspapers were managed better, they wouldn’t be hurting, but that’s a different issue. Let’s talk IBM PCs.
The biggest problem with IBM’s PC division was those three letters. Few people remember the specifics of IBM’s policies in the 1980s, but it bred a great amount of mistrust. There were people who were willing to buy IBM anyway, even though it was clear IBM was doing whatever they could to prop prices up–I started my career in a shop that couldn’t have possibly been any more Blue–but as time wore on, clones got better and the motto “Nobody got fired for buying IBM” faded. Prices fell and margins fell, and IBM reversed course, embracing industry standards, but the mistrust remained. I’ve told these stories hundreds of times, but in the mid 1990s when I was working retail, for a few weeks I had a good-quality IBM PS/1 at a very attractive price. I can’t remember the specifics anymore, but I think it was $1099, at a time when it was very difficult to get a decent computer for much less than $1,500. And yet, I had trouble getting customers to look at it. They’d pay more for a Compaq or a Dell or an HP, because it wasn’t IBM. Even though that $1099 IBM didn’t have a proprietary bone in its body, the perception remained.
I had the occasional customer come in who was bound and determined to buy IBM. I particularly remember one guy walking up to me and saying, “Sell me an IBM. They’re the best. I’ll be paying cash.” And I walked around the store with him, helping him decide what computer to get, what monitor to get–IBM of course, but what size?–and then it came time to get a printer. He expressed disappointment that IBM didn’t make printers. When I told him IBM spun its printer division off into Lexmark, he gravitated to Lexmark. Easiest sales job I ever had. But those were the exception.
Thinkpads were a little different. If you ever spent significant time with a Thinkpad, you’ll probably understand. Thinkpads are a cult. But whatever magic IBM captured in the Thinkpad never translated successfully to the desktop. People are willing to put up with proprietary–or the perception of it–in a laptop but not in a desktop, I guess. And Thinkpads weren’t quite enough to prop up IBM’s entire PC division all alone.
And the thing about IBM is that it would always rather pull out of a market too early than too late. They sold their hard drive business in 2002, while it was still profitable. They spun off their printer business in 1991 while it was still profitable. They sold their dialup business in 1998 when most people still used dialup modems to get on the Internet. So getting out of the PC business was pretty much inevitable.
So am I surprised that Lenovo finds selling PCs more profitable than IBM? Not at all. Lenovo licensed the rights to continue to use the IBM brand for a while, but stopped using it long before the agreement ran out. Lenovo isn’t a name most people recognize, but it sounds innocent enough. IBM still has that stigma of a monopoly.
It’s weird. Maybe the difference is that AT&T got broken up in the 1980s and IBM didn’t. AT&T got punished by the government; IBM got punished by the marketplace. Now AT&T has pretty much reassembled itself and the marketplace couldn’t care less. Meanwhile the marketplace kept punishing IBM for something it stopped doing in 1992. It’s funny how that works.
And in something related, HP announced today that it’s seriously considering spinning off its PC business. Even though HP is perennially the #1 or #2 vendor, and it made a very expensive purchase of Compaq in order to get there, now they want out.
I don’t know that getting out of PCs entirely is the right move for HP. They aren’t exactly losing money on their PCs, and selling PCs helps them sell other devices that are more profitable, like printers. But I’d call it a low-risk move. If they change their mind about being in the PC business, they should be able to get right back in. They could buy another struggling PC maker, or just make a deal with Asus again, since HP laptops are usually Asus rebrands, and most HP desktops are Asus motherboards in an HP-branded case.
Something weird happened with HP. They bought Palm, and suddenly Palm’s Web OS looked like the answer to everything. Put it on tablets–fine. Not much of a stretch. Put it on PCs. What? Put it on printers. Somebody hide the crack pipe! And now? Get out of consumer devices completely.
Once upon a time there was HP. Then HP bought Compaq and became The New HP. Now the New New HP is going to look a lot like IBM, only with less experience.
Meanwhile, Lenovo’s pretty happy with how things are working out.