to Sell Aptiva Direct
- October 20th, 1999
1999 International Business Machines Corp. announced that, starting January
1, 2000 it will only sell its Aptiva line of consumer PCs through its "ShopIBM"
website. This move follows on the heels of its recent announcement of cuts in
the PC organization (See TEC News Analysis article: "IBM
to Make Cuts in PC Business Real Change, or Just Buying Time?" 10/13/99).
Although the Aptiva is aimed primarily at consumers, we expect this to affect
business customers as well.
is the next step in the retooling of IBM's PC organization, and is designed
to get IBM's cost structure back in line. Since losing approximately $1 Billion
in 1998, the PC group has been in difficulty, and management feels the "Dell
model" (i.e. direct sales, especially through the Internet) is the way to solve
at least part of the problem. But, IBM still appears unwilling to commit to
this path corporate statements indicate they may return to the retail channel
at some point. This lack of clarity indicates that IBM is being reactive, not
if executed well, will lead to sales growth for the Aptiva. However, because
of the short timeframe for execution (less than three months from now), combined
with the lack of clarity, we believe execution will not go smoothly (65% probability).
Compaq has been trying to fine-tune their model for six+ months; we believe
it will take IBM at least that long.
In the bigger
picture, this means yet another major PC player is following Dell's (and Gateway's)
lead. Assuming IBM prices their systems competitively, we expect this will abet
consolidation of the PC marketplace.
Users who have
shied away from IBM because of pricing or retail vs. channel confusion will
benefit from this announcement. The benefits arise from (1) IBM's change of
focus, and (2) expected pricing benefits.
pricing benefits will not occur until IBM has decided its cost structure is
in line, and that the direct model saves them as much money as anticipated.
However, users may want to exercise caution until IBM rings out the bugs from
their new distribution model, which should take three-six months from the official
start date. Once the model is running well, customer confidence in IBM should