IBM Sell Off

By Henry Newman

As we have all heard, IBM looks to be selling its x86 server division to Lenovo.

Lots of my customers are very unhappy about the potential sale as they do not want their servers controlled by a Chinese company. I am not going to make value judgment if this is good or bad. The issue really is that we have no one to blame.

I see this as no different than when other industries went offshore. We have seen textiles and steel leave and almost saw the auto industry go off shore. Of course, the reason all of these industries left was cost. We as a society did not want to pay extra to have a domestic supplier and/or in the case of the auto industry, we did not want to have to buy a lower-quality product.

The commoditization of the computer industry is a reality. We all heard rumors not long ago that HP wanted to sell their PC division. So we have two big companies trying to sell their x86 divisions.

It is clear to me that what else is happening is that Intel is trying to take more of the margin for the system over the years in the x86 market. The motherboard today has far more Intel product than it did ten years ago. For the most part, in commodity products, those who add the most value get the most profit. As things move down the value chain, the profit margins get lower and lower.

If the rumor is true, I think IBM is making the right move for the long term. Like it or not, no one will pay extra for commodity product.

This article was originally published on June 12, 2013