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What's Next After IBM Decides To Get Out of PCs?

On paper, IBM's landmark decision to gracefully exit the PC business that it helped create more than two decades ago makes perfect sense. With profits next to impossible to come by and competition from Dell on the rise, the move to sell off the PC business to China-based Lenovo Group for a total $1.75 billion in cash and stock simultaneously improves IBM's profit potential while removing a management distraction.

But for some of the biggest IBM partners, including those members of VARBusiness' VARBusiness 500 ranking of the largest solution providers in the North American market, the ground-breaking deal raises all kinds of serious issues.

Consider, for a moment, the dilemma of Bob Venero, CEO of Future Tech, a Holbrook, N.Y. based IBM business partner (No. 355 on the 2004 VARBusiness 500). Future Tech has invested more than $1 million building one of the largest ThinkVantage technology centers outside of IBM. It's a world-class facility where Future Tech customers can try out some of IBM's most advanced PCs and it is dedicated solely to IBM. Now, however, Venero, a loyal IBM partner, is wondering when and if he should bring in other vendors. Lenovo, of course, will have rights for five years to sell IBM-branded devices and have broad access to IBM technology, but, in the end, the IBM PC business is likely to go away one way or another.

"IBM's whole play was going to the value play, not the volume play," says Venero. Now he's unsure exactly what to think.

Other VAR500 CEOs are wondering the same. That includes those with longstanding ties to the PC division and even those whose IBM business has been concentrated elsewhere. The questions these and other industry executive raise are many. What, for example, will happen to government contracts that favor U.S. based manufacturers? (Despite the fact that Lenovo is expected to open a New York headquarters and despite the fact that IBM will hold an 18.9 percent stake in the company, Lenovo will still be a Chinese company.)

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