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In computer news this week Thursday, December 9, 2004
The end of an era, or IBM abandons its biggest mistake –
The IBM corporation recently announced its decision to sell its PC business to China's Lenovo Group in a deal that calls for Lenovo to pay $1.25 billion in cash for IBM's PC business, and for IBM to take an 18% stake in Lenovo.
IBM has ranked a distant third behind Dell and Hewlett-Packard.
Ok that’s the official corporate speak cover story. Let’s look at this in the historical perspective of the PC industry.
The most common misconception of the PC industry is that IBM created it. Actually, nothing could be farther from the truth.
The PC industry officially began in January of 1975 with the introduction of the Altair computer kit by MITS company founder, Ed Roberts. This was a hardware only computer, desperately in need of software, which is where Bill Gates and Paul Allen came into the picture, before Microsoft was founded.
All this early history is detailed in my History of the Microcomputer Revolution, which is online at http://www.mtamicro.com/microhis.htm.
It was a full six and ½ years from this date until IBM introduced their first IBM PC in August of 1981 mainly because they felt this was a small emerging market in which they could make a profit. After all, if long haired hippies who named their computer Apple could make a profit, imagine what the world’s biggest professional computer company could do.
So incredible was IBM's success that the October 3rd, 1983 issue of Business Week magazine ran a cover story entitled "Personal Computers - and the Winner is - IBM", which went on to explain how IBM had gone from zero to market domination in 2 years, surpassing even front runner Apple Computer.
But then IBM went on to make some colossal marketing errors, starting with their disastrous PC junior computer. And then the PC clone computers emerged, starting with Compaq computers, and then the Northgates and Gateways and Dells and a massive influx of no-name imports from overseas, and it wasn’t long before IBM fell behind in the PC marketplace which they had legitimized by entering. In my experience, most of the clone computers were all superior to the IBM pc’s, and a much better value.
Then IBM started marketing their pc’s through retail outlets such as Radio Shack and Office Depot, but they couldn’t stop the flood of pc clones.
But perhaps the biggest loss was to IBM and all the vendors of mini and mainframe computers at the time, and since. Sales virtually came to a standstill as businesses worldwide began to take a serious look at what these little pc’s could so, and it wasn’t long before the PC revolution swept the world, causing probably billions of dollars of losses to traditional mini and mainframe computer sales, from which some companies never recovered.
So in retrospect, IBM dabbled in the PC marketplace, lost it very quickly, paid the price of trying to stay in it for a couple decades, and now is finally trying to bow out gracefully.
I believe this is the classic example of a Pyrrhic victory.
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This is Frank Delaney
(C) 2004 MTA Micro Technology Associates