First, IBM sold off some of its patents. Now Big Blue is selling off some of its business lines. After selling off its PC, hard drive and printer businesses in recent years, IBM is exiting the retail hardware business.
Toshiba TEC just announced plans to acquire IBM's Retail Store Solutions business for $850 million. The IBM division offers retail point-of-sale solutions. Once the deal is done, Toshiba TEC will become the largest retail point-of-sale systems company in the world, spanning hardware, software and integrated in-store solutions.
But that won't be the end of the Toshiba-IBM relationship. As part of the deal, Toshiba plans to use IBM's Smarter Commerce experience to bear on its growing enterprise. Toshiba TEC is entering a multiyear agreement with Big Blue in which it will become an IBM Premier Business Partner for Smarter Commerce.
IBM Exiting Commoditized Businesses
"The opportunities in retail store solutions are expected to grow by increasing demand in POS systems," said Mamoru Suzuki, president and CEO of Toshiba TEC. "In addition, demand for multi-channel integration and enhancement of store back-office management accelerates further expansion of sales ."
Suzuki went on to say that the acquisition of IBM's Retail Store Solutions business will allow his company to expand its global point-of-sales business through a combination of the competitive product lineup and worldwide network. Toshiba TEC is doing this by picking up Retail Store Solutions' business operation functions globally, including development, sales and related in-store maintenance.
We asked Charles King, principal analyst at Pund-IT, to discuss IBM's reasoning for disposing of its retail hardware business. He told us the move is in line with IBM's long-time stated intention to exit parts of the market that become commoditized.
"We saw that in the past with IBM's sale of its PC unit to Lenovo, the sale of its hard-drive business to Hitachi and a sale a couple of years ago of its printer division," King said. "IBM will retain something like 20 percent of the business, which is also part of its strategy in previous deals. Toshiba will take ownership of the entire business over time."
A Strategic Partnership
The transaction is expected to close late in the second quarter or early in the third quarter of 2012, and a new holding company will be established in Japan. Steven D. Ladwig, currently general manager of IBM Retail Store Solutions, will become CEO of the new U.S. company.
King noted that Retail Store Solutions was a mere $1.15 billion of IBM's $100 billion-plus annual revenues.
King expects IBM and Toshiba to move ahead in a tight partnership, with Toshiba building the cash registers and terminals and IBM providing the back end and data center pieces. He called it a good deal for both companies.
"POS terminals represent a global business but a lot of the growth is happening in the developing world, whereas a lot of the western nations are moving further toward online sales where POS terminals are not a necessity," King said. "So the growth is going to be in Asia and Africa and part of the Indian subcontinent. Toshiba is obviously a major player in the Asian market."