AND THE ELEPHANT DID DANCE... IIPM

IIPM PUBLICATION
Strategically, it was not much more than the dancing elephant (read IBM) going for a business portfolio rationalization in order to be leaner and dance better. Symbolically though, IBM’s selling off its PC division to Lenovo for $1.75 billion in 2004, shook the very contours of corporate America. It signified the crumbling of another American bastion, and ensured that things would not be the same again.

But clearly, Big Blue had more to think about beyond an image issue! While it had successfully changed the industry standard from extremely bulky, high end machines to small, powerful personal computers when it invented the PC, it had failed to visualize the impending future. PCs very quickly became commodities with little diff erentiation other than price; and that’s where competitors like Dell literally stole the thunder with aggressive pricing and logistics. The most testing time was in the early 1990s, when IBM was at the brink of bankruptcy; and breaking it up seemed to be the best option. It was former CEO Louis V. Gerstner’s radical restructuring with layoff s and ridding the company of its product centric thinking that rescued the company from insolvency. From losses of $7.98 billion in 1993, IBM posted a net income of $7.93 billion in 2005. IBM has now focused on high end server systems and financing (28% of pre-tax income), soft ware (37%) and services (35%) and also consulting services with a vengeance. In India, in particular IBM’s business excluding PCs grew by 59%, and IBM is ramping up its headcount in a big way. Consulting is IBM’s bet for the future. Finally, the elephant is playing the value game and dancing to its strengths, rather than its weaknesses.

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Source :- IIPM Editorial, 2006

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