16/09/2010 North America
IBM - once the world's largest computer company - has shifted its focus away from PCs, and set its sights on products and services that have greater and more sustainable impact, says CEO Sam Palmisano.
Palmisano was the special invited speaker at this week's WSJ's Viewpoints Executive Breakfast Series, co-sponsored by IESE Business School and BCG.
"Would you want to be in the PC business today?," Palmisano asked rhetorically, noting that IBM sold this aspect of their business to a Chinese partner, Lenovo, in 2001.
"Today I'd have to pay them to take it," he said. "And the reason being is that technology shifted. We wanted to get out before it was obvious to everyone. I mean, do you want to sell an asset when it's obvious that it's damaged?"
At the PC's profitability peak, IBM was selling mobile computers at $4,000 at 40 percent gross margin, he said. Today, the market price is roughly $500, meaning margins are collapsing and the PC has become a pure commodity.
Palmisano said IBM, which is currently the fourth largest company in the world, cannot be defined by any product nor business model. It is simply a firm that emphasizes innovation, he said, which is why it has survived so many economic cycles.
"At the end of the day, if you're in technology, you have to create the future. You can't just resell somebody else's future creation," he said.
Founded in 1911, the firm has some 400,000 employees worldwide. Recently, "Big Blue" has focused on specialized software in diverse areas such as healthcare, banking and traffic analytic, which have higher value segments.
Viewpoints is an exclusive discussion series that features interviews with prominent business leaders, led by Alan Murray, Deputy Managing Editor and Executive Editor, Online of the Wall Street Journal.