IBM PCs back from "dead"

An IBM executive says that the PC is far from "dead," echoing revisionist comments being made by other execs and dampening speculation that IBM is going to get out of the PC business.

Brooke Crothers Former CNET contributor
Brooke Crothers writes about mobile computer systems, including laptops, tablets, smartphones: how they define the computing experience and the hardware that makes them tick. He has served as an editor at large at CNET News and a contributing reporter to The New York Times' Bits and Technology sections. His interest in things small began when living in Tokyo in a very small apartment for a very long time.
Brooke Crothers
3 min read
An IBM executive said yesterday that the PC is far from dead, echoing revisionist comments being made by other executives and dampening speculation that IBM is going to get out of the PC business.

Recent comments from IBM chief executive Lou Gerstner about the end of the PC era and calls by analysts at prominent investment houses for IBM to exit the PC business have caught more than a few people's attention.

But IBM's new general manager at the Personal Systems Group, Jim Pertzborn, said yesterday in an interview that "the PC is far from dead."

"We're still seeing [PC] growth. It is fundamental for us to be in the PC business," said Pertzborn, who became general manager two weeks ago. "We're unequivocally in the PC business."

On the other hand, he echoed Gerstner's sentiment, saying that the "world has moved on from a client-server [PC-centric] model to the network as the primary model of computing. This is what we're trying to say."

Gerstner also qualified his PC-era-is-over declaration in a statement he made in the IBM annual report. "This is not to say that PCs are going to die off, any more than mainframes vanished when the IBM PC debuted in 1981...But the PC's reign as the driver of customer buying decisions and the primary platform for application development is over. In all those respects, it has been supplanted by the network," Gerstner said in the annual report.

The upshot is that IBM sees the PC as one of many possible devices attached to a network in the future.

Analysts say the seesawing of sentiment is tied to the evolution of computing versus the fact that the PC is still a popular device. "The profound influence of the PC and the growth [era] is over. But it's still a big market. The PC business is still a sizeable, established business," said Bruce Stephen, an analyst at International Data Corp..

"Companies have to look like they're moving forward but PCs still lead to sales of services and other products," he added.

The "PC is dead" notion has its roots in the waning fortunes of PC makers as boxes get cheaper and cheaper and profit margins shrink. "PCs [at IBM] lost almost $1 billion last year and were unprofitable in 1996 and 1997. The loss in PCs was a key reason hardware only contributed 29 percent of corporate pretax profit," stated Merrill Lynch analyst Steven Milunovich said in a report.

"What's management going to do about it? We recommend that IBM exit the desktop and consumer PC businesses and OEM PCs from Dell or Intel and stick the IBM brand on it when required as part of a solution," he added.

While this sort of dramatic restructuring of its PC business doesn't appear to be in the works for Big Blue, the company has recently struck a number of high-profile deals that do lend some credence to the theory that IBM is looking for ways to change its position in the industry. Recently, IBM has signed multibillion dollar deals with Dell and others under which IBM serves as a disk drive, chip, and display supplier for companies marketing brand-name computers.

Startling statements, which were later revised, have also been coming from Hewlett-Packard. On Tuesday, HP's chief executive Lew Platt said: "The PC era is over? I don't think so."

Platt was seemingly less gung-ho about the PC in December, when he called them "pretty crude."