With the development of high-tech industries, the continuous shortening of technology and product life cycles, and the substantial increase in innovation costs, global market competition has become increasingly fierce, resulting in excess production capacity and forcing enterprises to establish effective Exit mechanism. Usually in periods of high growth, companies are accustomed to seizing entry opportunities and choosing fields to enter, which is certainly the key to business success. However, how to grasp the exit opportunity and choose the exit method is also the key to the invincibility of the enterprise. Thurlow, an economics professor at the Massachusetts Institute of Technology in the United States, likened the conscious adjustment exit of enterprises to "self-destruction" and pointed out: "Companies must be willing to self-destruct while they are still successful in order to continue to become successful new enterprises. If they If you don’t destroy yourself, others will destroy them.”
Reviewing Lenovo’s acquisition of IBM’s PC business case is of great practical and theoretical significance for further analyzing IBM’s exit strategy through asset divestiture.
Background on the case of IBM selling PC business
In January this year, in an interview with Palmisano on the occasion of his resignation as CEO of IBM, the reporter mentioned a series of brilliant achievements he had made. During this period, IBM's stock market value increased by 125%, sales revenue rose from $81 billion in 2002 to $107 billion in 2011, and annual earnings per share rose from $3.07 at the time to $13.38 now. However, the most noteworthy one is IBM's successful sale of its personal computer division to China's Lenovo Group.
On December 8, 2004, IBM and Lenovo reached an agreement to sell its PC business unit, including all of IBM's notebook and desktop computer businesses and related patents, and the IBM Shenzhen joint venture (excluding its X series production line ), as well as R&D centers in Yamato, Japan and Raleigh, the United States; Lenovo can use the IBM brand within 5 years, and IBM's Global Finance Department and Global Services Department will become Lenovo's first choice in leasing and financial services, and authorized outsourcing maintenance services respectively. supplier. According to the agreement, Lenovo will pay IBM US$1.25 billion, including US$650 million in cash and another US$600 million in Lenovo Group's 18.9% stock. At the same time, Lenovo assumed IBM's US$500 million debt, and its actual transaction volume reached US$1.75 billion. On May 1, 2005, Lenovo officially announced the completion of the acquisition of IBM's global PC business. IBM has transformed into a software service provider in the IT industry.
Why did IBM spin off its PC business?
Seven years later, Palmisano revealed to reporter Rolle that at that time he had already seen that the IT industry would undergo major changes, such as cloud computing. , the future focus will be on services and software, rather than hardware. From an operational perspective, IBM's PC business has been subject to strong price pressure from Dell and other companies, and profits have become thinner. Out of careful strategic considerations, Palmisano decided to sell the PC business while it was still profitable.
At that time, “the internal controversy over the sale of the PC business was fierce, because the sale of PCs would drag down other products. Without the support of the strong purchasing power of the PC department, the cost of electronic components for IBM’s mainframe computers would rise; Moreover, the sale of the PC and other hardware divisions may cause IBM to lose the number one global technology company and be replaced by HP. Therefore, this decision to sell is extremely difficult. In fact, HP and Dell are also. While HP was actively moving towards software and services, it also planned to sell its PC division, but then gave up because its president, Whitman, hesitated.
“I have listened carefully to everything everyone said. A point of view. Palmisano said, "Suppose you decide to transform to a different space for development, where there is innovation, where you can do unique things, and get corresponding compensation from there, and the PC business will not be able to provide such a space." ”
In this regard, Clemens, a professor of operations and information management at the Wharton School of Business in the United States, commented at the time that IBM’s sale of Lenovo ended decades of wrong decisions and was a step forward for Big Blue. An acknowledgment of competition’s failure. “That’s probably not a bad idea. Since IBM will no longer be the lowest-cost manufacturer, what will you gain by staying?"
Wall Street analysts also agree with Professor Clemens. "Now that the risks are understood , we agree with IBM's decision.
Melenovich, an analyst at Merrill Lynch, said, "We have always held the view that the only sustainable profit points in the PC business value chain belong to Intel, Microsoft and Dell."
IBM's strategic gains from selling PCs
After IBM decided to spin off its PC business, its criterion for selecting a suitable buyer was not the highest bidder, but more based on its global development strategy.
Usim, director of the Wharton Center for Leadership and Change Management, speculated at the time: “The reason why IBM sold its PC division to Lenovo was more to strengthen the blueprint giant’s cooperation with the Chinese government rather than to transfer assets. Sell ??it for a good price. ”
Palmisano also confirmed this to reporters this time: “IBM rejected the purchase requirements of Dell and other private equity investment companies, and insisted on selling its PC division to Lenovo for two reasons: First, , because he sees limited future development space for this business unit, especially in the field of innovation; second, it can win reliable support to enter the promising Chinese market. ”
In 7 years, just as Useem predicted, the deal has achieved a win-win effect. IBM has transferred most of its resources from manufacturing and selling computers to providing more services related to the Internet. related products and services. At the same time, it has also gained more opportunities to provide services and products in the Chinese market.
IBM’s decision to exit is decisive. , was not as indecisive as Yahoo and HP. Today Palmisano is clearly proud of its strategic transformation, telling Rohr that "you have seen the choices that have been made and the benefits that have resulted" if IBM continues to retain it. The PC division may get less, but it will drag down the company's profits more, and it will not be able to focus more on investing in cloud computing, consulting, data mining and services. Now, IBM's stock market value has reached 217 billion US dollars. More than 4 times the market value of troubled HP. Sales revenue from the Asia-Pacific region, including China, already accounts for a quarter. There is no doubt that IBM has developed well in China.
< p>At the same time, Lenovo has implemented new strategies and accelerated product development through various reorganizations and management optimizations. In 2011, it surpassed Dell and Acer and became the world's second largest PC company after HP.In 2011, IBM has attracted huge investments from Buffett, who is full of praise for Big Blue's strategic vision.
IBM's inspiration for seizing the opportunity to exit
First, asset divestiture. There may be complex motivations behind the behavior, and accurate understanding requires tracking its complete life cycle: 1. Raising a large amount of cash through asset divestiture will help improve the company's liquidity position, or reduce the company's debt level. . Selling assets that are not core businesses to better focus on the industries in which it specializes. 3. Generating synergy effects by divesting part of its business and allowing it to exert greater value in other areas. 4. Forced by government antitrust. divest assets due to regulations, etc.
Second, we must have a sufficient understanding of the difficulties and obstacles in implementing the exit strategy. First, the company's market exit strategy is a "self-destructive" behavior. The current decision-maker (especially the original maker of the decision) means "self-denial", which may be more difficult to accept emotionally. Second, take the tire manufacturing industry as an example, the radial tire. Entering the market means that the world's tire products must be cut by two-thirds, because their service life will be 3 to 5 times that of old tires. If companies only regard this phenomenon as a temporary difficulty and do not realize the need to exit in time, they may even be affected. If we increase investment instead, by the time all companies realize that they need to exit, they will have missed the best opportunity. The third institutional obstacle is that the exit of enterprises is still limited to administrative "closing, stopping, merging, and transferring." ”. The asset market, property rights market and capital market are still under construction and cultivation, artificially increasing exit costs and barriers.
Thirdly, the exit strategy of an enterprise is based on the overall situation of the enterprise and is based on Reprinted for the overall development needs of the enterprise
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