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Sunday, December 05, 2004

End of An Era
The Agnoist [OE 12/7/2004: usually referred to as the Agonist] quotes Zaman:

INTERNATIONAL 12.06.2004 Monday

IBM Retreats from Individual Computer Area

International Business Machines, better known as (IBM), will cease producing their personal computer (PC) production activities.

According to the news of New York Times, the strongest candidate to buy the IBM line is Lenovo, who is number one in production capacity in China.

IBM made a huge contribution to the computer industry when it launched its first line of PC's for home use in 1981. IBM now plans to focus on constructing servers for firms and information solutions area.

IBM leaves behind 12 percent of the market share with an annual turnover of $92 billion and fierce competitors like Hewlett and Dell.

Here's how ABC/AP report the story:

NEW YORK Dec 3, 2004 — International Business Machines Corp. has reportedly put its personal computer business for sale in a deal that could fetch as much as $2 billion and close an era for an industry pioneer that long ago shifted its focus to more lucrative segments of the computer business. Its stock rose nearly 2 percent in midday trading in the wake of the report.

The New York Times reported Friday that IBM is in serious discussions with the Lenovo Group, China's biggest maker of personal computers, and at least one other unidentified prospective buyer for the unit....

Its profits have been slim. Morgan Stanley said IBM's PC business contributed less than 1 percent of the company's earnings per share....

Armonk, N.Y.-based IBM was a major force in driving personal computing into the mainstream with its introduction of the IBM PC in 1981.

As personal computers shrunk in size and price, they became fixtures on the desks of everyone from college students to NASA scientists. Before the PC, the only way to complete computer-level computations was by using a mainframe computer machines that could take up entire rooms and were so expensive, only the biggest companies and wealthiest universities could afford one.

But competition has driven down prices....

IBM's sales from personal computers, printers and point-of-sale terminals increased 17 percent in the first nine months of the year, driven by strong sales of its ThinkPads.

But 2003 was tougher. Sales were up 3.1 percent in 2003 versus 2002, according to the company's annual report. The increase was entirely due to the weak dollar, which improved sales abroad. Factoring out the weak dollar, sales fell 2.5 percent.

Revenues for personal computers decreased because prices for the computers continue to fall, the report said.

IBM ranks third behind Dell of Round Rock, Texas, and Hewlett Packard Co. of Palo Alto, Calif., in the personal computer business, according to Gartner Inc....

If IBM sells the business, one company that may feel pressure is competitor Hewlett Packard, whose CEO, Carly Fiorina has been "defending their PC business for years," Dartmouth's Johnson said.

"The argument has been that you need that branded white box to stay on the top of mind of Fortune 500 chief information officers," he said. "What IBM is saying is that's not so important anymore."

There's an interesting list of various candidates for the title "first personal computer." The IBM 5150 PC was not the first; nor was the Apple ][.

Here's a historical perspective from CNET, written in 2001 on the 20th anniversary of the IBM PC:

Few could have imagined that an instrument of revolution was sitting innocuously on the shelves of local Sears Roebuck stores. Twenty years later, however, it's clear that the personal computer has changed life in modern society, from simple "word processing" to the introduction of the Information Age.

"I can hardly think of an element of society that hasn't been changed by the PC," said Charles B. Kreitzberg, CEO of Cognetics and an expert on the relationship between people and computers. "Corporate culture has begun to shift into a new paradigm. The World Wide Web links us all in a way never possible before. None of this could have happened in the same way without the PC."

IBM's introduction of the 5150 PC on Aug. 12, 1981, has been viewed alternately as a stroke of brilliant technological foresight and the biggest business blunder of the 20th century....

From a business perspective, the significance of the move has been dramatic. The introduction of the IBM PC, a machine that sold for as little as $1,565 with 16 kilobytes of memory, transformed the founders of little-known companies Microsoft and Intel into billionaires and made software the most lucrative product in corporate America....

Two decades later, the personal computer is still changing culture. More than half of all U.S. households have a PC, enabling the Internet to evolve from a government and academic niche to a mainstream communications medium. Therein lies its lasting legacy and greatest historical significance to technology veterans and sociologists alike....

Few computer aficionados were overwhelmed by IBM's first attempt at making a PC. The 1981 edition came with a 4.77MHz Intel 8088 processor, 16 kilobytes to 256 kilobytes of memory, and an operating system called DOS 1.0. IBM managers used off-the-shelf parts, an operating system from Microsoft and chips from Intel, and they marketed it through independent distributors such as Sears and ComputerLand.

At the time, people who used PCs--mainly academics and scientists conducting mathematic research or laboratory simulations--said the IBM machine was inferior to the polished Apple II or minicomputers such as the Programmed Data Processors (PDP-11 and PDP-10) from Digital Equipment Corp. (DEC) and the Virtual Address eXtensio (VAX).

They complained that DOS 1.0 offered much less than a smoother, faster operating system called Control Program/Microcomputers (CP/M), created by Gary Kildall, a computer science teacher at the U.S. Naval Postgraduate School. Kildall, buddy of the young Apple creators in Cupertino, Calif., created CP/M in 1972, nearly a decade before the IBM PC....

Even IBM didn't fully believe in the little machine. Senior executives greatly underestimated demand, originally planning to sell 241,683 PCs from 1981 to 1986. Instead, it sold about that many in the first full year and 3 million during the first five years....

Big Blue lent a legitimacy that a group of 20-somethings in Cupertino could not. With the stamp of one of America's most respected brands, backed by a powerful marketing campaign, the IBM PC became a machine that people believed would change the world....

IBM's entry into the PC market triggered an explosion in sales. In 1980, about 25 fledgling computer companies sold 724,000 PCs for $1.8 billion, according to industry research firm Dataquest. In 1981, when IBM joined the fray, nearly 50 companies sold 1.4 million PCs for nearly $3 billion. In 1982, roughly 100 companies sold 2.8 million PCs for nearly $5 billion.

"I don't think IBM's entry made the difference, but it certainly was a statement that computers for individual people made sense," said Douglas A. Davis, professor of psychology and an expert on the relationship between humans and computers at Haverford College. "That was something not everybody believed at the time."

In addition to flexing its marketing muscle, IBM fueled the PC market through a business strategy that academics and business leaders still debate as a masterstroke or a miscalculation: It licensed the operating system from Microsoft and the chips from Intel, permitting the bit players to sell their products to other companies.

In doing so, Big Blue made Bill Gates and Andy Grove phenomenally rich, and it spawned an industry of PC "clones" that would soon outpace IBM itself.

Some of the first to seize on that concept were Jim Harris and Rod Canion, Texas Instruments engineers who in 1982 ambled from their Houston offices to the nearby House of Pies restaurant to discuss a business plan for selling IBM clones. They emerged with a series of drawings depicting how their PCs should look, scribbled on a paper placemat because they forgot their notebooks. Later that year they founded Compaq Computer.

The key to Compaq's success was the reverse-engineering of one of the few pieces of proprietary software in the IBM PC--the basic input/output system (BIOS). Without knowing the BIOS, clones couldn't effectively run popular software such as the Lotus 1-2-3 spreadsheet.

"It must have worked," Canion laughed, recalling the laboratory detective work. "We got our funding."

In fact, Compaq set a record for the largest first-year sales of any American business. It reached the Fortune 500 list and surpassed $1 billion in revenue faster than any other company. Nine years after Compaq was founded, it employed more than 10,000 people and operated in 65 countries.

Hundreds of clone makers jumped into the market, stealing customers from IBM with lower prices and more attractive machines. By 1986, more people bought clones than they did IBM PCs....

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