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SCMP Reporter

IBM's local subsidiary has plans to improve the lacklustre performance of its personal systems business and it plans to spend the remainder of 1993 becoming more aggressive and more responsive.

  And with good reason too: in the past three years, IBM in Hongkong and China has not kept pace with its more nimble rivals such as AST Research and Compaq Computer.

  To redress the slide, IBM China/Hongkong introduced the Personal Systems Business Unit (PSBU) last month. It is a semi-autonomous group with profit/loss sheet responsibility, to focus exclusively on the PC market.

  The move emulates the corporate restructuring of the past year in which the US$10 billion IBM PC Company was established as a wholly owned subsidiary autonomous of IBM's monolithic upper corporate echelons.

  Since it was formed last September, the PC Company has proved successful beyond any expectation.

  What had been a loss-making division, sluggish in responding to industry shifts a year ago, is suddenly making money. It is also getting new products to market faster and - for the first time in a long time - is extremely price competitive.

  Setting up the Personal Systems Business Unit in IBM China/Hongkong is a direct response to the fair market showing locally. It is particularly bad in China, where, despite considerable investment, IBM continues to perform miserably.

  According to PSBU general manager Mr Samuelson Young, the unit was about market focus: 20 IBM executives dedicated exclusively to the PC market.

  The structure is unusual for IBM. Although it is a unit of the IBM China/Hongkong subsidiary, as a profit centre the PSBU is expected to account for services received from other units.

  The unit's autonomy and accountability is geared to making the local PC business more productive; more efficient.

  Mr Young said the unit's freedom to make its own choices would be extended.

  In Hongkong, the results of the IBM PC Company - which last year set about overhauling pricing strategies, including the introduction of the new low-end IBM ValuePoint systems - are already clear. According to Mr Young, IBM doubled PC volumes in Hongkongin the first quarter over the same period a year ago.

  He said the subsequent formation of the PSBU would boost IBM's share of the market further, the decisions and strategies of the PC Company having been brought down to the country level.

 Though Mr Young reports to IBM China/Hongkong managing director, Mr Robert Savage, for accounting purposes PSBU has a direct pipeline to the IBM PC Company through regional executives based in Japan and Australia.

  Having removed several reporting layers that existed between the Hongkong/China field sales and PC design and manufacturing, orders and delivery cycles should improve.

  Special design requests from the Hongkong and China markets should also stand a better chance of implementation.

  The China market continues to be a source of great frustration and disappointment for IBM's PC business, so it is not surprising that China PC sales have been declared a major 1993 priority by managing director Mr Savage.

  Mr Young won't talk about sales volumes in China. But in a market where AST is expected to sell between 80,000 and 100,000 units this year, and Compaq Computer not much less, IBM is not even in the race.

  The performance of an ambitious PC manufacturing joint venture set up with the Tianjin Zhonghuan Computer Company in 1990 is indicative of IBM fortunes in the China PC market.

  When it was established, the venture was expected to grow to a modest capacity of 30,000 systems in three years. According to Mr Young, the facility is producing at a paltry rate of about 2,000 units annually.

  That Tianjin-based factory is part of Mr Young's PSBU and its future is still being considered.

  Though the company has a long way to go to catch up with market leaders in China, Mr Young is confident IBM's performance this year will be a vastly improved one, largely because of the introduction of the inexpensive ValuePoint range.

        Mr Young said IBM had not been competitive in China in the past mainly because its machines were too expensive, and because the company's Microchannel architecture proved unpopular against regular ISA (industry standard architecture) machines.



IBM set to reassert its dominance