NYT: IBM PC Division Sold To Advance China's Goals

theodp writes "Back in 2005, Wharton's Michael Useem speculated that IBM's sale of its PC Division to Lenovo was more about ingratiating Big Blue with the Chinese government than getting top dollar for the assets. 'Government relationships are key in China,' Useem explained. Now, a NY Times article on outgoing IBM CEO Samuel J. Palmisano seems to confirm that Useem's analysis was spot-on. From the NYT article: 'In 2004, I.B.M. sold its PC business to Lenovo of China. Mr. Palmisano says he deflected overtures from Dell and private equity firms, preferring the sale to a company in China for strategic reasons: the Chinese government wants its corporations to expand globally, and by aiding that national goal, I.B.M. enhanced its stature in the lucrative Chinese market, where the government still steers business.'"

One wonders if IBM got it's money's worth over all

[Karmashock]

They're implying that IBM took less money for it's asset to curry favor with the chinese. That would only make sense if IBM got more money then the difference between the two payments over time as a result of that good will.

Has that happened? I don't know... I think American business might have been too brash in it's oriental investments. Most of them seem to be backfiring in alarming ways. We seem to have taught our chinese business contacts just well enough to start competing with us directly where before our technological edge made that impossible.

In any case, it seems like many of the US multinationals have woken up to the issue. We'll see what happens.

Ouch!

[CuteSteveJobs]

Palmisano was not well liked within IBM. He was after all the guy who told IBM's US employees they could take a job in the third-world at third-world wages or stay in the US and get sacked. For this Palmisano will be forever despised.

http://www.infoworld.com/d/the-industry-standard/ibms-palmisano-techs-slumdog-millionaire-257 [infoworld.com]

Sure, the business press has wet dreams about Palmisano and Gerstner who picked him as his successor:

http://www.forbes.com/2011/01/03/forbes-india-person-of-the-year-sam-palisan-ibm.html [forbes.com]

But the truth was really quite ugly. You won't read this in Forbes, but you will read it in - of all places - the reader feedback at Amazon:
It is strangely ironic that, after doing his best to suppress all negative communication within IBM, it should be the reader feedback on amazon.com that alerts Gerstner to what the world at large really thinks of him.

In the last five years, Gerstner has reaped a profit of [$$$] million in the sale of awarded stock options. These stock options were awarded while he held the joint positions of IBM CEO and chairman. During that period, IBM spent [$$$] billion buying back its own stock to drive the price up so that executives could cash out at handsome profits. This is money that could have been spent on developing new products, attracting new talent and honoring promises made to employees and retirees.

Where did all that money come from?

Not from profit growth, which remained flat at about 2 percent per year when you strip out the retirees' pension fund surplus "vapor profits."

It came from selling off large chunks of the company and its assets, laying off tens of thousands of employees and slashing pension and health care benefits for employees and retirees. In 2002 alone, IBM has quietly cut 15,000 jobs. Health benefits, which were promised "free for life," now cost retirees a substantial amount of their pensions. Only one minuscule cost-of-living increase has been awarded pension recipients in the past 11 years.

The greed doesn't stop there. Now, Lou had not only been retained as chairman of the board, he has been awarded a 10-year consulting contract, with fully paid expenses at his previous salary of $2 million a year. These expenses have been conservatively estimated to be $100,000 annually.

Save IBM? More like turning it into just another money grubbing corporation while lining his pockets. I would love to see a rebuttal book. God help us all if Lou's management methods become benchmarks for future corporate leaders.

http://www.amazon.com/Elephants-Dance-Inside-Historic-Turnaround/product-reviews/0060523794/ref=dp_top_cm_cr_acr_txt/185-5256096-7601530?ie=UTF8&showViewpoints=1 [amazon.com]

Re:No development for 6 years

[Elbereth]

Maybe that's because there are only a small handful of companies that make laptops. Dell, Apple, IBM/Lenovo, HP, etc all buy laptops from a few ODMs [wikipedia.org], then put their sticker on it. From a long time, Asus was the only company that designed, manufactured, and sold their own laptops, but they recently spun-off their ODM business. Chances are, half of those laptops that you were using before were simply rebadged Asus laptops. They sold many laptops to Apple, Dell, and IBM. Nowadays, it looks like they just slap on a sticker, like everyone else -- too bad. I liked being able to skip the middle man.

Re:One wonders if IBM got it's money's worth over

[evilviper]

GMs marketshare in China is dismal. And on and on.

WTH are you talking about? GM is perhaps the biggest of the China success stories.

"GM sold about 1.83 million vehicles in China last year [versus] 2.07 million cars and trucks in the U.S. But GM, already the leader in China with 13.4% of the market, is still gaining share. GM's market share was 11.3% in 2008."

http://money.cnn.com/2010/01/12/news/companies/gm_us_china_salesrace/index.htm [cnn.com]

Re:News Flash: CEOs Think Strategically

[iter8]

My reading of history convinces me that most bad government results from too much government. - Thomas Jefferson [monticello.org]

Don't believe everything you read on the internet. - Abraham Lincoln.

Re:News Flash: CEOs Think Strategically

[d3ac0n]

Fancy machines don't help when a problem is structurally inherent.

Communism's primary issue is not that it scales poorly, although it does. Communism's primary issue is that it works against basic human nature. It failed even in villiage-sized experiments back in the early colonization days of America. The Pilgrims tried their own brand of it and it failed miserably. And they had religious pressure to help the system along! IE: It was God's Will, they were building a new Jerusalem. WAY more pressure for them to work together and make it work than your average modern communist society. It still fell apart. Behold the writing of William Bradford, one of the Pilgrims who arrived on the Mayflower: (emphasis mine)

All this while no supplies were heard of, nor did they know when they might expect any. So they began to consider how to raise more corn, and obtain a better crop than they had done, so that they might not continue to endure the misery of want. At length after much debate, the Governor, with the advice of the chief among them, allowed each man to plant corn for his own household, and to trust to themselves for that; in all other things to go on in the general way as before. So every family was assigned a parcel of land, according to the proportion of their number with that in view, â" for present purposes only, and making no division for inheritance, â" all boys and children being included under some family.

This was very successful. It made all hands very industrious, so that much more corn was planted than otherwise would have been by any means the Governor or any other could devise, and saved him a great deal of trouble, and gave far better satisfaction. The women now went willingly into the field, and took their little ones with them to plant corn, while before they would allege weakness and inability; and to have compelled them would have been thought great tyranny and oppression.

The failure of the experiment of communal service, which was tried for several years, and by good and honest men proves the emptiness of the theory of Plato and other ancients, applauded by some of later times, - that the taking away of private property, and the possession of it in community, by a commonwealth, would make a state happy and flourishing; as if they were wiser than God.

For in this instance, community of property (so far as it went) was found to breed much confusion and discontent, and retard much employment which would have been to the general benefit and comfort. For the young men who were most able and fit for service objected to being forced to spend their time and strength in working for other men's wives and children, without any recompense. The strong man or the resourceful man had no more share of food, clothes, etc., than the weak man who was not able to do a quarter the other could. This was thought injustice. The aged and graver men, who were ranked and equalized in labour, food, clothes, etc., with the humbler and younger ones, thought it some indignity and disrespect to them. As for men's wives who were obliged to do service for other men, such as cooking, washing their clothes, etc., they considered it a kind of slavery, and many husbands would not brook it.

This feature of it would have been worse still, if they had been men of an inferior class. If (it was thought) all were to share alike, and all were to do alike, then all were on an equality throughout, and one was as good as another; and so, if it did not actually abolish those very relations which God himself has set among men, it did at least greatly diminish the mutual respect that is so important should be preserved amongst them. Let none argue that this is due to human failing, rather than to this communistic plan of life in itself. I answer, seeing that all men have this failing in them, that God in His wisdom saw that another plan of life was fitter for them.

These matters premised, I will now proceed with my account of affairs here. But before I come