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.'"

News Flash: CEOs Think Strategically

[dtmos]

For once, a CEO thought beyond the next quarterly report. Be careful what you complain about.

Re:News Flash: CEOs Think Strategically

[Elbereth]

I think that, at this point, China is fascist, not communist.

Trust?

[PolygamousRanchKid]

Although US and Chinese companies do business with each other, I'm not really sure that they trust each other. And both sides have good reasons for being so. US companies want access to a growth market, but are wary of their investments in a country whose government and legal system don't function like they are used to elsewhere. China is fearful that foreign companies want to get in to exploit their market and resources, while cutting not fostering local business growth.

But at the moment, business and government go hand-in-hand in China: you can't deal with one, without automatically dealing with the other. So yes, if IBM wanted to dump their PC business anyway, because it is now a commodity business, why not use it as a pawn it a greater game with China?

However, IBM still makes high end Intel blade servers. What will happen when Lenovo starts to wander up into that end of the market?

Re:News Flash: CEOs Think Strategically

[Shifty0x88]

Whoa whoa whoa, first off, IBM did this years before Obama spent all the money on companies which the people needed to exist or they would totally rely on the government for money and help. This of course after his predecessor cut taxes on the rich, made banks give loans to people who couldn't pay them off, oh and that little "war" we had over in the Middle East, which we are still in even if we aren't in Iraq some what, 10 years later? China only owns us on paper, and what are they gunna do about it

I have to ask, are you a hipster Strat? You have that I like it, but only if I'm the only one that likes it

I think IBM did this so they would get kickbacks from the corrupt Chinese government. It's in the article and in the blurb: "I.B.M. enhanced its stature in the lucrative Chinese market, where the government still steers business."

Agent of a Foreign Power

[Required Snark]

Should IBM be registered as the US agent of a foreign government? In the last year or so they stopped reporting how many people they employ on a per country basis. I can only assume that they did this so they could maintain an illusion that they were still a US-centric organization.

Given the way many large US based multinational companies behave, they routinely put their corporate interests at odds with the US government and economy. They ship as many jobs as they can overseas and doge taxes. GE paid no federal income tax last year. GM invested in it's China operations while it was in a bankruptcy funded by the US Treasury.

But since they are still "US" corporations they don't get the kind of scrutiny that would be required if they were not US based. It would be a lot more realistic to recognize that they have no meaningful commitment to the US and they act on their narrowly perceived economic goals. It would be better for the country if their access to the US political establishment was limited, based on how their economic interests driven by non-US governments.

Re:News Flash: CEOs Think Strategically

[Runaway1956]

How about I complain about Corporate America and Corporate Globe whoring themselves to China?

Few if any corporations owe their past successes to China. These prostitutes are selling technology discovered by mostly the Western world, and Russia, and some from the third world to China for a short term profit. Yes, 5 years or 10 years is short term. China is the only frigging entity in the world with a long term goal. Assassin's mace.

Oh, but someone will post here again, telling me that's just a conspiracy theory. Conspiracy theory my ass - we see it happening before our very eyes.

http://en.wikipedia.org/wiki/Chinese_aircraft_carrier_programme [wikipedia.org]

It is their goal to dominate the United States economically, politically, and militarily. And, IBM sells out to China, just as they sold out to the Nazi's before the United States declared war on them.

HEY, IBM!! You owe your current economic position and success to the west!

Re:News Flash: CEOs Think Strategically

[SuricouRaven]

Communism has existed. In communes. It can actually work, if you just want to run a village. It just scales really, really poorly.

The outrage because it's China?

[m00sh]

Is the outrage because the country is China? Every laptop I've bought in the past five years have come from China.

I think the biggest fear we have is that China is now going to create companies that as the article says are global players. We have constantly dismissed China as a cheap labor pool where work would vanish if the wages went up, then as backstabbing reverse-engineers who dare betray the sacred trust of US companies of moving their operations to China for profit, and then to mindless cultural inferiors where American exceptionalism would outshine and blaze away anything the Chinese could do. Now, we're fighting the fear that Chinese could become global players with these thinly-veiled outrage stories.

As they used to say in the 80s movies, "are you afraid of a little competition?"

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

[andydread]

Not sure a significant enough amount of North American multinationals have woken up to the issue. Many business are crawling all over themselves to get a piece of the "emerging China market" and that is their focus while completely ignoring the fact that all China wants to do is learn so it can create its own to compete with them. I see it didn't go good for Google. It won't go good for Bing. GMs marketshare in China is dismal. And on and on. US companies will never gain a foothold in China unless they have a worldwide monopoly such as Windows. And even with Windows its mostly bootleg versions that MS did not get any $ for. The only exception I can think of is Boeing and even their tech is on the list for homeland replication. Once they start building big jets then Boeing is done.

Maximum profit

[octogen]

The IBM home page tells me about IBM's "responsibility" regarding things like:
societal issues
the environment
education
health
culture
(http://www.ibm.com/ibm/responsibility/index.html -- also click the links on the left, for example about politics)

But what's more important, is how to be good friends with chinese dictators who don't give a shit about any of the topics mentioned above, so as to make more $$$ by doing business with china.

I doubt that acting like this is going to turn this world into a "smarter planet".

Re:News Flash: CEOs Think Strategically

[raehl]

Communism depends heavily on the people picking up the slack being within striking distance of the slackers.

Re:News Flash: CEOs Think Strategically

[BlueStrat]

Whoa whoa whoa, first off, IBM did this years before Obama...

You seem to be under the mistaken impression that the things I described have only occurred recently, when in fact it's been a trend that has been accelerating for many decades.

...before Obama spent all the money on companies which the people needed to exist or they would totally rely on the government for money and help.

Wait, what? By that logic the people are made dependent on the government either way. Having the government direct the "money and help" through a third party doesn't change anything, except for increasing the levels of corruption in both the government and private sector. Never mind the fact that the government has no business giving/loaning taxpayer money to private business simply to prop them up if they would otherwise not exist. Doing so distorts and eventually destroys the free market and twists capitalism into a corrupt and extremely destructive amalgam of socialism and fascism.

"If we can prevent the government from wasting the labors of the people, under the pretense of taking care of them, they must become happy. - Thomas Jefferson"

A government big enough to give you everything you want, is big enough to take everything you have. - Thomas Jefferson

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

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not. - Thomas Jefferson

Charity is no part of the legislative duty of the government. - James Madison

The Utopian schemes of re-distribution of the wealth...are as visionary and impractical as those which vest all property in the Crown. - Samuel Adams

The Constitution only gives people the right to pursue happiness. You have to catch it yourself. - Benjamin Franklin

In the main it will be found that a power over a man's support (salary) is a power over his will. - Alexander Hamilton

Strat

Re:News Flash: CEOs Think Strategically

[Anonymous Coward]

If you were aware of world history as it relates to China and western countries, you would know that "the west" owes its advancing to the industrial revolution and beyond directly to Chinese technologies (e.g., Paper, gunpowder, compass, and printing). So that China is going to inevitably dominate the West yet again is simply a return to the historical norm.

And that China is getting access to western technologies to do so is entirely justified based on history.

Re:How long do you wait to see a doctor in the UK?

[iserlohn]

First of all, I lived in the US, the UK and Canada, each for a significant amount of time, so I have first hand experience with all three medical systems, as well as some experience with the medical systems of other countries as I have worked or stayed in a number of places for shorter periods.

Now back to your question. All important surgery in the UK is prioritized. If you want anedoctal evidence, my sister-in-law who is a university student in the UK fell on her face (which is quite terrible for a girl) not-too-long-ago requiring in 13 stitches in total. Due to the location of injury (very close to her eye), the A&E (ER) doctor in the hospital where she was taken from immediately referred her to a plastic surgeon who is a specialist in these proceedures to minimize the risk to her sight (and her face). She was taken by ambulance to the other hospital and had surgery performed. This process took in total 6 hours. She stayed in hospital for the night and went back several times to the specialist to check up on her progress and to ensure that any scarring is kept to a minimum.

The UK does not have a perfect medical system, but IMHO it is very good, especially considering you don't usually have to pay anything out of pocket (The whole NHS system is paid for out of general taxation). If you are not happy with the care, there are a variety of options available. You can top-up your NHS coverage with private insurance that pays for proceedures which do have a waiting list (like hip replacements) and specialists while still using the NHS for frontline care, or you can go private completely and buy insurance that covers everything, including GP (family doctor) visits. Counter-intuitively, this nationalized system also created a very competitive market for health insurance as private insurance is basically a "luxury". You can buy personal coverage for a family of four for 30 GBP (~45 USD) for basic cover, to roughly 100 GBP (~150 USD) for fully comprehensive cover which is roughly 1/10 the cost compared to the average in the US.

Re:News Flash: CEOs Think Strategically

[SuricouRaven]

Consider the implications though. Machines replace humans for even more assembly line work, then attendant and cashier work, then store shelf-stacker, and cleaning, and so forth. It works just as it should: Costs come down, and (assuming sufficient competition) these savings are passed on to the customers. All is well, up until a vaguely-defined point. Then you hit a problem: There are a lot of people who are unemployed, and unemployable due to a lack of jobs. Unless you want them to starve or turn to crime to feed themselves, that automatically means a welfare state is the only option. Worse, those people on little to no income won't be able to spend much, which means they can't create much demand for goods and services, which means even fewer jobs to meet that demand... positive feedback. Total collapse of the labor market, and everything else with it. In such a situation, a technologically-enabled communism of some form may be the only option - no matter how bad it may be, it can't be any worse than an economic nothingness. The only other possibility is a basic income model where the government guarantees every individual some level of no-strings-attached money to at least keep them fed and housed - but such a system has never been tested on such a scale, and it's dubious if sufficient taxes could be raised to sustain it.