Now that IBM is selling its PC business, everyone (bar a few cats and Ian Betteridge over at Technovia) seems to think that the thing IBM will want to do right away is to.. buy a PC business.
Put like that it obviously doesn’t make any sense. The financials don’t work either: as Ian says, Apple has cash to fight a takeover, and Steve Jobs would want to remain independent. (Note that Jobs has *never* worked to anyone, except briefly when John Sculley was in charge at Apple. Sculley fired him and Jobs bore the grudge for, oh, ever.)
By selling its PC business, IBM frees itself to sell anyone’s PCs, even Apple’s, as part of a profitable service business, and can concentrate on the PowerPC range of chips. The services people won’t get heat from the PC people if they recommend Dells.
Even the wilder suggestions that IBM might want to have OSX don’t make sense. It’s into Linux and its own mainframe operating systems. Not a BSD spinoff.
Ian almost hits a point near the end: suppose, rather than Apple itself being sold to IBM, the company just sold the Mac to Big Blue? This would give Apple two big benefits: it would free the company to concentrate on the two things that have the most potential for growth, digital media and software (a Windows version of Final Cut Pro would sell faster than Apple could duplicate the discs). It would remove a huge chunk of expenses, in the form of hardware development of a platform that, even at the most optimistic estimates, has only limited potential for growth. And it would give Apple the chance to break free of the need to develop and support an operating system, something which is both expensive and increasingly difficult.
Unfortunately this doesn’t quite work either. Does that mean Apple would hang on to OSX? The implication is not. But it is the *hardware* that makes money for Apple. Even if the iPod overtakes the “computer” side in terms of sales and/or profits, the hardware makes money where the software tends to be a cost. I’ve seen estimates by an academic that OSX has cost around a billion dollars to write. I don’t think it’s made that back yet. Although things like the supercomputer orders it’s received show promise.
But if you consider that as being promising, and pointing towards IBM wanting to buy that computing arm, then IBM would have to pay a lot more than $1.5 billion. Why do it, then? And why would Apple leave itself with either an orphaned operating system (even IBM couldn’t make a lone OS work) or reliant on writing for Windows?
Sorry, but even if you subtract Steve Jobs’s pride from the equation – allow yourself some time – you are not going to create an arrangement where this makes sense except as it is. Making Windows PCs is a zero-sum game. Making Apple computers isn’t.
Wednesday 8 December 2004 at 4:55 pm
I suppose IBM could also enter into a HP iPod-style agreement and sell co-branded, Apple-made “IBM + Apple” Macs and PowerBooks running OS X. Would be good for Apple (Mmm, corporate sales), but I’m not really sure what IBM would get out of it.
Still, it’s fun dreaming these things up, isn’t it? :)
Wednesday 8 December 2004 at 6:10 pm
I agree with matsimpsk, that this MIGHT be a logical way forward for IBM. What IBM would get out of it is it would reinforce it’s PowerPC business.
What is clear is that IBM is EXIITING the low margin PC business. Why on earth would it want to get back into it at a cost at least 10x what it has made getting out of it? Apple’s business is not exactly high margin (at least at the net profit level). No way will it buy Apple, and no way would Apple let itself be bought in this case. But a desktop that would work well in an IBM enterprise environment, is more secure than Windows etc, could be attractive for IBM’s large corporate customers. There are also similarities in terms of build quality etc. So, perhaps the solutions business would do a deal in a way which does not compromise their agreement with Lenovo, especially in a Linux/non-MS environment?
What I haven’t seen mentioned in all this is how it changes the landscape wrt to IBM and Microsoft and IBM and Intel. As no.3 PC maker, IBM was a very large client of both. Their relationships of course have not been simple, but suddenly this DOES change the landscape somewhat, and I would have thought that would concern both those companies, and at least have some effect on their control. Any diminution for either company is at least partially beneficial to Apple, and imho much more so to the wider IT community.
Interesting times?
Ian
Wednesday 8 December 2004 at 7:27 pm
To be honest I think you’re both being wayy overoptimistic. IBM didn’t sell its own machines in preference to, say, Dell’s when it owned a PC business. There’s no great benefit for it to resell Apple machines, even if they have its own chip. Because their *customers* will specify Windows machines – or PCs running Linux.
What it does mean is that PC prices are going to be forced down by Lenovo. That will hurt HP just as it has before. Even Dell is going to be put under pressure by this.
Read the BusinessWeek article “The China Price” – http://www.businessweek.com/magazine/content/04_49/b3911401.htm . Michael Dell should be worried, even though his stuff is made there already. These guys are coming after him and all he owns.
Thursday 9 December 2004 at 10:33 am
from appleturns.com (quoting from CNET, the running dogs of microsoft imperialism)…
Thursday 9 December 2004 at 1:30 pm
Nick
Thanks for pointing this out. This doesn’t surprise me in the slightest. I can’t imagine someone buying a company’s business only to let that same company start it all again the next day! A large part of the price had to be for the use of the name itself (there’s not much else worth paying for in a loss making business!).
I hadn’t meant to imply that IBM would do a deal with Apple, and I was trying to say that I thought the rumours of any deal were basically ludicrous. However, I think this deal changes the landscape, and the effects from that will take some time to filter through. I also believe that much of IBM’s business now is from integration, management etc – not from hardware sales. Therefore, I do think there must be business opportuities for Apple (in the longer term), especially as certain things Apple does complement IBM’s positioning.
What Apple might have to worry about – as Charles points out for Dell, is the neverending march towards commoditisation. The less high end brand names there are out there, the more Apple will have to compete on absolute price, however much it differentiates itself. In the end, this headline price thing may sound great but I wonder whether the consumers really will be done a favour. We seem to be in a time when even simple things no longer work as they should (eg try matching a DVD player, and a skybox with a plasma TV and you’ll see what I mean). If commoditisation meant things becoming more consumer friendly, then it wouldn’t be so bad, but I think the opposite is happening!
Ian
Thursday 9 December 2004 at 2:35 pm
Shame there is that ban on a link up betwixt Apple and IBM…the headlines alone would be priceless…”Big Blue Mac and Fries” anyone?