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Originally Posted by Barcey
IBM has never left the Wintel server business and has regained market share by changing their strategy. They lost significant business because they tried to protect their old business segmentation rather then trying to make the best product they could in every segment. At the time of the speech Compaq was number one, Dell was a growing second and IBM was a has been. I'm not sure why you think they would have been better off giving up the billions of dollars of revenue they've made in this segment.
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It depends upon who you are, what business you are in, and what your business model is.
Like I said, IBM has never been the low cost producer, and Intel compatible machines are commodities. Note that IBM also sold their PC business to Lenovo.
For a company like IBM, the question may come down to whether they want to compete in a low margin commodity market at all? The answer may be "no - stick to higher margin lines where it's easier to add value and charge higher prices with better margins." IBM was broadly enough based that they could survive without the Wintel server business.
If you are Dell, set up to be a low cost producer and sell in huge volume, it's one thing. If you are IBM, who historically has not been that sort of company, it's another.
And billions in revenue is all very well, but you have to actually make money out of it. If you don't, it doesn't matter how many billions of revenue you have.
IBM's strategy these days focuses on adding value in other areas. They don't just want to sell you a box - they want to sell you software, integration, and consulting services.
(And yeah, their business segmentation model led to unintentional humor. The AIX based supermicros were competing against the AS-400s, and IBM reps would do these interesting little shuffles when this was pointed out.)
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The cannabilization concept is only important on the original decision to release the new product. Normally it doesn't matter because if you don't release it somebody else will. You are never guaranteed to keep the old business, you have to compete under the new terms.
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Certainly. And note there have been classic cases of companies that
did try to eat their own children and failed. Where are Digital Equipment (once the second largest computer manufacturer in the world) and their arch-rival, Data General? After selling off pieces in an attempt to survive, what remained of DEC was bought by Compaq, and is now part of HP. DG's Clariion disk storage products are still made, sold, and serviced by EMC, but the rest of DG is gone.
Both had existing bread-and-butter mini-computer lines. Both were responding the the growing use of supermicros running Unix that competed with their minis. Both developed their own supermicros running Unix (DEC's Alpha and DG's Aviion lines). Neither could ramp up the sales of the new products fast enough to stem the bleeding as customers abandoned the minis.
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Dennis