Although some of you might be a little young to remember this, not that long ago, when IBM was a player in the consumer PC space. Successors to the original IBM Pc were common sites in both homes and offices. Their ThinkPad line of laptops were positively iconic and maintain a cult following to this day. But in 2005 IBM sold off their entire PC division to Lenovo, and these days big blue no longer makes personal computers.
Instead, focusing on analytics, cloud computing and selling mainframes to larger organizations.
So, what happened that led them to this? I mean just imagine if Apple stopped, making iPhones, McDonald’s stopped serving up Big Macs or Taylor Swift stop dating people to provide fuel for her pop hits.
It turns out the seeds of IBM’s downfall in a personal computer space were sown well before the early to mid-2000s. Although the original IBM PC released in 1980 was very successful because of its relative affordability and consumers familiarity with the IBM name. It wouldn’t take long for its own world-changing invention to slip from its grasp.
IBM originally developed most of the components in its PCs themselves. This allowed IBM to initially keep a stranglehold on the PC market. A far cry from what we’re used to today, where you might find parts from dozens of manufacturers inside both home built and store-bought computers. But as it became a resource and time consuming for IBM to do everything themselves, they started to include components from other companies. Notably operating systems such as Microsoft’s ms-dos and CPUs from Intel.
Now, IBM opening up their platform in this manner made it easier for other companies to build systems they labeled IBM PC-compatible. Often at a lower cost than big blue could do it. Soon enough, both PCs and their components were seen as commodity goods, instead of something special that consumers felt compelled to buy specifically from IBM. Once this happened, IBM’s domina began to evaporate. IBM’S original business model which relied on vertical integration, helped them become a dominant force. But was now actively working against them, especially in the PC space.
As more successful companies we’re focusing on keeping their operations narrower. For example, specialising in only hard drives or processors instead of manufacturing complete systems. Other companies such as Compaq, we’re also selling complete systems. But they enjoyed more success than IBM as they didn’t have to deal with the amount of sheer bloat that IBM took on from being such a vertically integrated Business.
By 1990, many of IBM’s divisions were operating on razor-thin margins. Not just its PC operation. Making matters worse was that IBM wasn’t exactly raking in the dough from other manufacturers, licensing their technology for PC compatible systems.
Instead, competitors just ended up developing or adopting open standards that cut out IBM completely. As the 1990s dragged on IBM felt even more pressure from companies like Dell. Who marketed and sold directly to consumers cutting out the middleman. IBM PCs were more commonly found in retail stores like RadioShack. And like IBM’s PC division, they also went the way of the dodo by the time the mid-2000s arrived. It was even harder to make money. Selling pre-built pcs has fallen component costs and the perception of the PC was no longer an unattainable luxury meant margins were slim for many manufacturers, but especially for IBM.
Although big blue CEO cited his opinion that they couldn’t do much innovating in the PC space. They were also losing money hand over foot, leading them to sell off their PC operation to Lenovo after 25 years in the industry.
But there’s, some good news for old IBM fans. Lenovo still sells at the ThinkPad complete with that little red mouse nub that’ll take you on a nostalgia trip back to 1992 and confuse you a little along the way.