Inside Hewlett-Packard, the world's second-largest personal computer maker, executives greeted the news on Friday that I.B.M., the world's No. 3 PC maker, might be retreating from the market, with good cheer.
Executives at Dell Computer, the largest personal computer maker, would not comment, but some industry analysts speculated that they too were smiling about I.B.M.'s decision.
Still, many in the industry were concerned that an I.B.M. withdrawal could accelerate competition in an industry where prices were already falling.
According to people close to the negotiations, I.B.M. is in serious discussions to sell its PC business to Lenovo, the largest maker of PC's in China - a rapidly expanding market that Hewlett-Packard and Dell covet. I.B.M. is in talks with at least one other potential buyer. Industry experts note that a sale to Lenovo may create a powerful new rival with operations based in China.
Promisel, an analyst at the research firm I.D.C., said a deal with Lenovo "would put up a significant roadblock to Dell and H.P.'s Asia Pacific expansion, at least potentially so." Mr. Promisel and others noted that a larger Lenovo, formerly known as Legend, could have the power to further squeeze down PC prices because of its track record as a producer of low-cost machines.
If they're able to complete a deal," Mr. Promisel said, "Lenovo is obviously going to be more aggressive on the pricing front, which could lead to a compression on price points in the industry," potentially eating into the profits of every PC maker. The price for I.B.M.'s personal computer unit is likely to be $1 billion to $2 billion. A buyer would be purchasing the blueprints to the ThinkPad, generally regarded as the world's most reliable and secure laptops.
"The ThinkPad isn't just the best machine for the price," said Richard Dougherty, director of the Envisioneering Group, a market research firm in Seaford, L.I. "It is the machine for anyone concerned about security."
buyer would presumably get the ThinkPad name and also I.B.M.'s customer list, but whether that would be worth much over time remains to be seen. According to people close to the negotiations, a buyer is also likely to get the use of I.B.M.'s brand name on PC's for a transitional period and I.B.M. may continue to sell the computers to corporate customers after the business unit is sold.
Dr. Dougherty said he was already hearing from I.B.M. customers fretting about a sale to a company that has specialized in low-price machines. "Customers are saying, 'Oh my God, we need to be assured we can get ThinkPad models that are just as secure and reliable, and not just a watered-down ThinkPad brand from Lenovo,'" Mr. Dougherty said.
While Hewlett and Dell may benefit from that uncertainty, they may not necessarily benefit over the long term. I.B.M.'s retreat from the PC sector may be an irreversible transition from a world where corporate workplaces have personal computers on each desktop to one where corporate offices run on centralized computer systems with simple monitors on desks known as "thin clients" that have network connections.
This transformation would tend to harm Hewlett more than Dell, industry analysts said, because Hewlett, like I.B.M., is stronger in the corporate market than Dell, which sells the bulk of its computers to consumers. I.B.M.'s potential withdrawal from the desktop computer business indicates it has concluded that growth in corporate PC sales is largely over.
If I.B.M. is getting out of the business because it can't make money, then investors will ask themselves, 'What does I.B.M. know that H.P. doesn't know?'" said Andrew Neff, an analyst with Bear Stearns.
And even for I.B.M., backing away from traditional personal computers now may not help, said Jonathan Schwartz, president of Sun Microsystems, one of I.B.M.'s top competitors.
