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2004: IBM Spins Off PC Business: The War of the Clones Is Over

On the 12th of August, 1981, International Business Machines introduced its IBM Personal Computer, the system that changed the world and history of the mankind. The computer that was designed for business, school and home eventually paved the way for new industries, new opportunities and new quality of life. In 2004, IBM decided to get rid of the PC business, which ended the era of IBM PC-compatibles and kicked of a new one.

The main idea behind the very first IBM PC model 5150 was the reason why eventually personal computers became commodity and IBM had to sold the business unit. Unlike many computers in the early eighties, IBM PC was modular, which allowed to quickly configure systems in accordance with users' demands, something which greatly reduced pricing of such personal computers compared to competitive offerings. Yet another thing that IBM did was allowing third-parties to develop software for IBM PC. The off-the-shelf hardware and software components as well as open architecture enabled other makers of computers to produce IBM PC-compatible clones. The IBM PC became a standard and the personal computer industry  as well as a new age in history were born. Naturally, IBM tried to stop cloning of its systems with various methods, from introduction of PS/2 systems in the eighties to using expensive innovations like titan skeletons for ThinkPad notebooks. But the clones prevailed.


IBM ThinkPad. Photo by laptopenterprise.com

While back in the eighties and the nineties production of computer components and computers was complex and expensive (as it was located in the U.S., Europe, Mexico, Japan, etc.), towards the end of the nineties and early-2000s manufacturing became much cheaper (as it was transferred to China, Taiwan, Thailand, Philippines, etc.). As a result, even small white-box makers without significant capital could build PCs locally while acquiring components from manufacturers in Southeast Asia. Needless to say that price wars started immediately across the industry.

By 2003, it became clear that companies like Intel Corp. are considering PC market as growing too slow for them and started to architect fully-integrated chipset platforms that allowed PC makers to integrate premium features into systems without increasing their price too much. As a result, systems with Wi-Fi support, which previously were considered as premium, quickly became standard. Moreover, with further development of platforms architected by chip designers other premium features and capabilities from high-end systems quickly migrated into mainstream. For example, with ultrabooks, ultra-thin systems are available from both premium manufacturers as well as from makers of low-cost systems at pretty much the same price-points.

Another issue for IBM with its PC business back in 2002 - 2004 was the fact that manufacturers from China and Taiwan gained a lot of advanced technology to build high-end systems and components and were able to quickly drop pricing (sometimes at the expense of R&D) in order to sustain their revenue growth. Needless to say that by 2004 it was clear: PCs are becoming part of the everyday lives of a billion of people, a commodity.

While IBM clearly was unable to compete on the market of commodities as the whole company is tailored for extreme innovation, for IBM, personal computers back in 2004 were somewhat a complementary business. The firm sold high-end servers, enterprise-class systems and mainframes to large businesses and PCs were then sold/bought to those companies as something additional, which prevented sales growth of ThinkPad or ThinkCentre. IBM could not compete against aggressive rivals like Acer, Asustek (which essentially produced IBM PC-clones) and others on the market of consumer PCs as well. As a result, on the 8th of December, 2004, IBM and Lenovo announced transaction under which the latter acquired the former's PC business unit.

It is clear that IBM helped to establish the market of personal computers and they changed a lot. However, IBM itself could not compete against crowds of makers who made the PCs a commodity product. While Lenovo was able to keep ThinkPad and ThinkCentre product lineups, nowadays those computers no longer represent the pinnacle of innovations. The top-of-the-range ThinkPad X1 laptop has a worse screen than a three-year-old ThinkPad X301, lacks WWAN support by default as well as other must-have features for an ultra high-end 2011 notebook that pretends to be absolutely-the-best. Nonetheless, the heritage of IBM innovation continues to live on in anti-spill keyboard, roll-cage design and other important parts of the ThinkPads.

 
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