IBM Lenovo Deal: PC firms adjust messaging as IBM deal opens up doors

In the wake of IBM's sale of its PC business, experts predict other firms will play on either fears or brand promises to lure away IBM customers.

In the wake of IBM's sale of its PC business, experts predict other firms will play on either fears or brand promises to lure away IBM customers.

The news that IBM plans to sell its PC business to Chinese technology company Lenovo came as a shock to many.

After all, IBM is the company that legitimized the use of the PC, says Leslie Fiering, research VP at analyst firm Gartner. And Forrester Research is predicting that the worldwide PC market will double by 2010, from 575 million today to nearly 1.3 billion, thanks to various emerging markets, including China, Russia, and India.

But IBM's decision might reveal some trepidation about the PC market's potential.

"For IBM to recognize that its PC division added no strategic edge to its current long-term goals says something," says Fiering, who early last month, before the first rumors of the IBM-Lenovo deal began to swirl, published a study predicting the consolidation of the PC industry. In it, she noted that IBM's PC division could possibly be spun off if it continued to be a drag on earnings.

And, according to Bloomberg News, that was just the case, as IBM's PC division has not made a profit for three-and-a-half years.

Nonetheless, PC companies would be wise to tune their messaging to the needs of PC customers, particularly those feeling a little uneasy after the IBM sale.

"A lot of people still remember the HP-Compaq merger, which did not go smoothly for customers," says Fiering. "IBM customers have a lot of questions about what will happen.

"We feel IBM has done a good job of reaching out to customers so far," she continues. "But competitors will certainly be playing up FUD - fear, uncertainty, and doubt. IBM developed FUD in the mainframe days to convince customers that going anywhere else would cause major problems and upheaval. Now their competitors are applying the exact same strategy."

The competition's response

Not everyone considers that strategy the best one, however. While uncertainty will surely provide an opportunity for other PC companies, the ones that take advantage of that will do so not by playing up fears, but by talking about their own brand promises, says Gary Thompson, EVP and GM of Schwartz Communications' San Francisco office, which works with Gateway.

"Ultimately it's about brand, not who can manipulate fear and uncertainty," Thompson asserts. "IBM, which has a strong brand, is selling to Lenovo, which has no brand in this market. That opens a lot of opportunities. But that will come from understanding the markets that IBM plays in, how to communicate to those markets, and taking the high road by talking about the benefits of your company."

Not that any of the PC companies will admit as much. Most have been silent on their intentions. And when they do talk about the PC market, they claim it will be business as usual.

IBM's sale to Lenovo won't change how Fujitsu Computer Systems uses PR, insists Megan Bucks, director of marketing communications.

Same for Dell, says Jeff Hunt, president of GCI Latin America, who works with the PC market leader. "Its strategy is so focused that it does not react to its competitors," says Hunt. "It reacts to customers."

But that doesn't mean Dell doesn't recognize an opportunity when it sees one. Hunt acknowledges that IBM's sale could lead more customers to Dell, as "one happy customer breeds many."

Lionel Menchaca, corporate PR manager at Dell, echoes Hunt's assessment. But he adds that IBM's business customers will be uncertain what the sale means, and Dell, in turn, will explain what it can do for those businesses, including what differentiates Dell from its competitors.

"If we get IBM customers calling us because they are uncertain about the future, our strategy remains the same," says Menchaca.

Differentiation will be a key component of messaging, adds Robert Maples, president of Maples Communications, which works with Toshiba Digital Products. HP, for example, will tout how it can offer companies a complete solution, from PCs to servers to service. And Toshiba Digital Products, which is strictly a mobile and laptop division, will position itself by focusing on customers' business goals and on how Toshiba's laptop PCs allow companies to outperform their competitors, says Maples.

Despite companies' insistence that they won't focus on the negative and push uncertainty and fear, that could be what drives new customers to them. IBM catered to the government market and conservative companies, explains Rob Enderle, principal analyst with the Enderle Group. But now IBM's PC division will be in the hands of a company that is partially owned by the Chinese government, and IBM's customers might not be too comfortable with that.

"HP and Dell are going to run hard after IBM's installed base," predicts Enderle. "HP is the closest to what IBM was and will say it is as good as IBM was. Dell will say its PC business is the foundation of the company and that no one will buy it. Both companies will talk about how they have a complete set of technology and services, particularly since Lenovo doesn't have servers.

"Even though the IBM brand will remain [on PCs for a few years], competitors will play to the uncertainty and really talk about how they have no intention of leaving the PC business," he adds.

Potential Gateway benefits

One company that Enderle and others say could really benefit from all of this is Gateway. A recent BusinessWeek article notes that Gateway has cut costs and renewed its focus on PCs, while competitors like Dell and HP are focused on consumer electronics. The piece asserts that Gateway has a strong brand, and the company has plans for global expansion.

But investors, who applauded the company's financial turnaround, are still a bit skeptical. The article points out that investors recognize how tough and crowded the PC market remains, with or without IBM.

"It's clear there's uncertainty about the IBM-Lenovo integration," says David Hallisey, Gateway's director of corporate communications. "We are strong in the government, education, and midsize-business markets. And we will continue communicating what we have been, [which is] that over the last six months, we've become more efficient, more profitable, and more competitive, selling low-cost, high-quality PCs to consumers and enterprise. Our competitors are making their money in other segments. We're committed to the PC space."

Gateway won't be alone in voicing its commitment to the PC space, says Fiering. Expect all the major players, from Dell and HP to Acer and Toshiba, to step in. And while the dominant players will promote their brands with promises that they will always be there for their customers, smaller players will point out "that if you can't even trust IBM to stay stable, why would you trust any of these other big names?" says Fiering.

But time is of the essence, adds Enderle, and companies need to jump on the uncertainty and opportunity now, if they haven't already.

"Anyone who isn't focusing their messaging is losing [some] opportunities," warns Fiering. "The more time that goes by, the more details will come out, and that means less uncertainty. People will have a better understanding of the deal. It's a big risk to wait. The smart companies were reaching out to IBM customers as soon as the rumors started."

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