IBM to focus on selling PCs direct

IBM's troubled PC unit recently announced plans to cut costs through layoffs. But the computer giant also plans to trim some reseller sales from its business model and put greater emphasis on direct, Web-based sales.

Off the bat, IBM said, it expects to reduce head count by 5 percent to 10 percent from its personal systems group of 10,000 employees. The business unit, which has both enterprise and consumer divisions, lost $US1 billion last year.

To right its balance sheet, IBM said it plans to follow in the Web footprints of Dell Computer in Round Rock, Texas, and offer better direct sales support to customers.

"We're taking a whole new approach to how we sell," said spokeswoman Trink Guarino. "We plan to streamline our marketing model, with increasing emphasis on direct sales and the merging of our consumer marketing team with the rest of the marketing team."

Guarino said a growing number of purchasers represent home office users who have the same requirements as business users, thus eliminating the need for separate marketing messages and sales tracks.

IBM said 60 percent of purchases from its e-commerce site, Shop IBM (, were personal systems group products. The company said it wants to drive $6 billion worth of overall product sales through the site by year's end.

Although the personal systems group division lost $150 million in the quarter ended June 20, it has posted revenue gains of 52 percent over last year, according to IBM.

Information technology customer Wayne Hastings, an IT manager at electric utility DTE Energy in Detroit, lauded IBM's move.

"There is no real supplier to corporate America online, except Dell," said Hastings. "You have to have the online option to get into the game. Once you're in the game, it's a matter of product, and that's where IBM has a chance."

Hastings' IT fleet includes approximately 8,000 PCs, a quarter of which get replaced annually. He also added that while users regularly request IBM's ThinkPad laptop computer, he avoids purchasing through channel outlets.

"Purchasing through middlemen is an aggravation instead of a benefit," he quipped, citing problems with order accuracy, delays and returns associated with reseller sales. Hastings buys directly from Dell.

Industry analyst Rob Enderle at Giga Information Group Inc. in Cambridge, Massachusetts, said he expects the personal systems group to take some cues from the success of IBM's profitable ThinkPad group. "The notebook organisation at IBM has grown share and remains very profitable and demonstrates that IBM can compete in this business if they have the right management group," he said.

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