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Sale Of IBM's Desktop Plants Shows PC Market Ripe For More Outsourcing

EBN, 2002-01 (1295), p.PG.1

Copyright CMP Media LLC Jan 14, 2002 ;ISSN: 1540-2118

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  • Title:
    Sale Of IBM's Desktop Plants Shows PC Market Ripe For More Outsourcing
  • Author: Bolaji Ojo And Claire Serant
  • Subjects: Alliances ; Competition ; Cost control ; Divestiture ; Manufacturing ; Outsourcing ; Personal computers ; Sales
  • Is Part Of: EBN, 2002-01 (1295), p.PG.1
  • Description: For Sanmina-SCI-and for competing EMS providers that lost out in the bidding for IBM's NetVista manufacturing contract-the significance of the deal centers more on what's left on the table both at IBM and its rivals, according to analysts. This was the largest PC outsourcing transaction by IBM, which is the world's fourth-largest PC manufacturer after Dell, Compaq, and Hewlett- Packard, according to estimates by IDC, Framingham, Mass. With the lowest gross margin of any IBM business, there's no doubt the PC operation was cutting into profits at the Armonk, N.Y., company. PC gross-profit margins slid to 11% in the third quarter of 2001, from 15% in the first quarter of the year, compared with 36% for the entire company. The hardware group itself posted a third- quarter gross margin of 24%, while IBM's server sales saw margins of 37%. Although they declined to provide details, executives acknowledged the PC unit was losing money, raising concerns since the product lies at the heart of IBM's e-business program. To survive in the PC market, IBM had to explore cost-savings initiatives such as outsourcing, they said. Analysts said Sanmina-SCI will likely try to eliminate any margin problems from the IBM transaction by transferring a majority of the production to low-cost Asian locations. IBM declined to comment on whether it expects Sanmina-SCI to shift production of its NetVista desktop to Asia. Industry sources said IBM's refusal to answer indicates it will embrace such a move as long as it helps reduce its production costs. http://www.ebnonline.com/
  • Publisher: Manhasset: AspenCore
  • Language: English
  • Identifier: ISSN: 1540-2118
  • Source: ProQuest Central
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