IBM Corp has been telling Wall Street and the US national press it believes it can revitalize its ailing PC business by selling more services, software, financing and other options to customers on the back of the desktop PC. Blue-on-Blue is the essence of what IBM is doing; selling additional products and services along with PCs.
IBM’s personal computer systems group head David Thomas told the New York Times that at best IBM can make only $0.03 per $1.00 revenue on the sale of a desktop PC. Adding other services and software can add another $0.50 in revenue and $0.09 profit, he said; The next big battle is beyond the box. IBM says that PC sales to services customers which were $500m have doubled to $1bn this year, 10% of the group’s revenue.
Some Wall Street analysts believe that IBM should exit the consumer and commercial PC businesses entirely because it does not properly understand how to address the market. The group lost $1bn last year on revenues essentially flat for the last three years, but has seen sales rise 34% to $11.2bn so far this year, with losses narrowing to $311m. Much of the loss was from its home PC business which it appears to be retreating from. Desktops still account for two-thirds of the PC business even though it is sales of NetFinity PC servers and Thinkpad laptops which carry the highest profit margins which are accelerating quickly. IBM sells 10% of PC directly and aims to get to between 20% to 30%. Its aim is to sell 50% directly to customers rather than through resellers.
