Advertisment

IBM pulls out of US PC retail market

author-image
CIOL Bureau
New Update

Not since the company dumped the PCjr and its market-leading PC-AT platform in the mid-and late 1980s, has IBM made as dramatic a move in the personal computer sector as this week, when the company announced it was pulling its computers off U.S. computer retail store shelves and would no longer market PCs through the highly competitive channel. IBM hopes to have vacated all U.S. computer retail stores in the first quarter of 2000. Instead, IBM is pushing online sales as the main marketing vehicle for its personal computer systems sold to consumers and businesses.



IBM's retail systems are sold under the Aptiva brand name. An IBM spokeswoman said the company might eventually return to the retail market if it could find a ways to actually make some money by selling there. Retail sales are expensive due to the high advertising support requirements most major retailers impose to support efforts to draw customers to their stores. Because intense competition from from companies such as eMachines, traditional vendors like IBM are often losing money on their retail sales. "We plan to pull Aptivas out of the U.S. retail channel in the U.S.,'' spokeswoman Trink Guarino said. "Once we come up with a formula that works, we will be back."



Even though IBM still has an 11.3 per cent share of the U.S. retail market, the move is not unexpected. The retail channel has been the source of much of the red ink the company's PC operations have produced in recent years. In 1998, the PC unit lost nearly $1 billion and, in the first half of this year it lost another $239 million. And IBM has slipped to third pace behind Compaq and Dell in the global PC market. IBM's overall business emphasis, meanwhile, has shifted dramatically towards the Internet and e-commerce solutions. Analyst said it was only natural that IBM would try to apply the online medicine it is prescribing to its customers to its own troubled PC business. "We are the leading provider of e-business, so we are going to put our money where our mouth is,'' Guarino said.



IBM has been selling the Aptiva PCs through more than 70 U.S. retail chains. Its machines will remain available in those stores through the Christmas shipping season. No new deliveries will be made after that. Consumers who want IBM brand name PCs will need to purchase them from IBM's online store at http://www.ibm.com/shop. Not included in the decision are IBM's ThinkPad notebook computers. And outside the United States, the Aptiva systems will remain on store shelves. "Aptivas are selling well internationally. They just are not differentiated on store shelves in the U.S.'' In the U.S. price remains the top selling motivator, not system features. Three-quarters of PCs sold through U.S. retailers in August were priced below $1,000, with a majority of those below $600. IBM has not been able to compete successfully in the market for machines in that price range.

tech-news