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China Tackles Marginalized PC

San Jose, Calif. — It would be a mistake to take last week's sale of IBM Corp.'s PC division to Lenovo, China's biggest computer maker, as the final sign that the PC is dead. The box, in fact, is very much alive — just not for the company that helped launch it.

In these early days of the transition to digital pictures, music and video, there's plenty of elbow room to sort out how the home PC will evolve into a media server or get embedded into devices like gateway/routers and TVs. But in an industry increasingly driven by cost, IBM once again made a choice not to take part.

Under CEO Sam Palmisano, IBM had already spun off its disk drive business and jettisoned storage adapter cards and merchant communications chips to concentrate on services, software and servers.

The PC business is about high volumes, low margins and off-the-shelf technologies. That just didn't fit with IBM's high-margin systems business. "IBM is an innovation company," Palmisano wrote in a memo to employees explaining the sale. And, once again, Big Blue is circling the wagons around its core innovations.

IBM has effectively said it does not see a breakout opportunity in PCs, hard drives or comms chips. Although the company helped codify the category with its IBM PC in 1981, it is now a distant third in sales to Dell and Hewlett-Packard.

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