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IBM to implement largest realignment in 15 years

IBM Corp is restructuring its hardware division around customer types rather than individual products, marking the biggest such realignment in the unit in 15 years.

In an internal memo sent to staff at the hardware group on Thursday, the head of the division, William Zeitler, said the changes would strengthen IBM's ability to sell technology to small and medium-sized businesses and to design products specifically for them.

IBM gets most of its business from big corporations and governments, but it has been trying to improve sales of services, software and servers to smaller companies because their technology purchases are growing at a faster rate.

Although IBM will still report hardware revenue by product category as it traditionally has, the realignment will create four client segments, including one governing hardware for large organizations and a separate one for its small and medium-sized customers.

The third segment will focus on "industry systems" in retail, telecommunications and healthcare, and the fourth on microelectronics, serving purchasers of the US company's own custom-made microprocessors.

Analyst Bob Djurdjevic of Annex Research said the realignment should help IBM move quicker and more in tune with the needs of smaller customers. While IBM's chairman and chief executive, Sam Palmisano, has been talking about "lowering the center of gravity of the company," that has been "mainly rhetoric" until now, Djurdjevic said.

Palmisano said last year that sales to small and medium customers might soon become IBM's single largest customer segment, surpassing the financial services industry. IBM claims small and medium businesses accounted for US$17 billion of its 2006 revenue, while financial services rang up US$25 billion.

However, that figure is not entirely as it may appear: It represents revenue reaped by IBM sales teams other than the ones who sell into the world's very largest organizations. As a result, companies with many thousands of people can get touted as small and medium business sales for IBM.

If IBM were to have counted only the sales into companies with fewer than 1,000 people, it is believed the figure would have been closer to US$11 billion in 2006.

Armonk, New York-based IBM is due to report last year's financial figures on Jan. 17.
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