IBM readies online sales push for new PC line

The company's decision late last year to stop selling its desktop PCs in some stores sacked its first-quarter sales. But executives at Big Blue say the company's plan to sell direct to consumers now is starting to show results.

The renewed effort will begin next week when the company begins to ship the NetVista, a slick new PC for small businesses and consumers. Consumers will mostly buy the machine (there will be seven versions in all) through IBM's Web site.

"Month-to-month shipment reports are up," IBM vice president John Yengo said in an interview.

Yengo said he sees no reason that IBM's market share shouldn't rebound in the coming quarters. According to Dataquest, IBM saw its portion of the U.S. market during the first quarter fall by nearly half, to 4 percent from 7.9 percent a year earlier.

The plummet, caused by a 41.9 percent drop in unit volume, sent IBM from fifth place to seventh place in U.S. computer sales. Armonk, N.Y.-based IBM also saw sales for its personal systems division--the unit that sells desktops, notebooks and PC servers--decline by $550 million during the first quarter.

But Yengo said things are looking brighter: the company is no longer losing money on each PC it sells.

"I'm already up," Yengo said, who heads marketing efforts for the home and home office business. "The day I stopped selling at the margins Circuit City wanted me to, I was ahead."

Analysts had a mixed reaction to IBM's move toward direct sales and gaining customers through the Internet.

"They're not getting the traffic that a Gateway or a Dell is getting, or even a Compaq," PC Data retail computer analyst Stephen Baker said.

But Scarsdale, N.Y.-based industry analyst Sam Albert, a former IBM executive, said the company has gone from doing $1 million a day in consumer sales on IBM.com to reaping more than $3 million a day. By contrast, IBM did $14 billion last year in total business over the Internet, most of which were sales to its biggest customers.

Yengo said the company is not trying to compete along the same lines as Dell or Gateway, spending vast sums on advertising to draw customers to its Web site.

"Any of the competitors that are trying to beat them that way will run out of money," Yengo said.

Instead, Yengo said IBM wants to play to its strengths, combining its Web presence with sales driven through existing IBM channels. As an example, Yengo said that because IBM now has a significant Web presence, it can pitch programs for existing corporate clients to offer home PCs to employees. Likewise, IBM's university clients can now offer computers to students without having to first buy them from IBM.

IBM also has changed the way it is marketing its computers, offering the same lines to both businesses and individuals.

The company just revamped its ThinkPad notebook line and within a week plans to deliver the first NetVista model, an all-in-one computer featuring a liquid crystal display. As with ThinkPad, IBM is using the NetVista brand for consumers and businesses.

International Data Corp. analyst Roger Kay said it is important that the first products IBM tries to sell under the new strategy be compelling.

"They've got the dice rolling on NetVista," Kay said. Although IBM has not said what the machines will cost, Kay said the product has received high marks in focus groups.

"Depending on how it's priced, it could be a real hot product," Kay said.

Kay noted that selling consumer products that are also aimed at business has worked for other companies, especially Dell.

PC Data's Baker suggested that if IBM wanted a more extreme approach, it could sell other makers' products under the IBM name, the way it does with items such as notebook cases and surge protectors.

"They're trying to get value out of the brand without doing the heavy lifting," he said. "Whether that's doable on the PC side, that might be a question."