WEBVTT 00:00:00.000 --> 00:00:03.040 Although some of you might be a little young to remember this, 00:00:03.040 --> 00:00:08.160 it wasn't that long ago when IBM was a player in the consumer PC space. 00:00:08.160 --> 00:00:15.360 It's for everybody, but it lives in your room. Successors to the original IBM PC were common sites in both homes and offices, 00:00:15.360 --> 00:00:20.000 and their ThinkPad line of laptops were positively iconic, 00:00:20.000 --> 00:00:28.880 and maintain a cult following to this day. But in 2005, IBM sold off their entire PC division to Lenovo, 00:00:28.960 --> 00:00:37.600 and these days Big Blue no longer makes personal computers, instead focusing on analytics, cloud computing, and selling mainframes to larger organizations. 00:00:37.600 --> 00:00:43.600 So what happened that led them to this? I mean, just imagine if Apple stopped making iPhones, 00:00:43.600 --> 00:00:49.920 McDonald's stopped serving up Big Macs, or Taylor Swift stopped dating people to provide fuel for her pop hits. 00:00:49.920 --> 00:00:52.960 Oh! That was rude. 00:00:52.960 --> 00:00:57.200 So it turns out the seeds of IBM's downfall in the personal computer space 00:00:57.200 --> 00:01:00.560 were sown well before the early to mid-2000s. 00:01:00.560 --> 00:01:03.840 Although the original IBM PC, released in 1980, 00:01:03.840 --> 00:01:10.080 was very successful due to its relative affordability and consumer's familiarity with the IBM name, 00:01:10.080 --> 00:01:15.920 it wouldn't take long for its own world-changing invention to start slipping from its grasp. 00:01:15.920 --> 00:01:21.600 You see, IBM originally developed just about all of the components in its PCs themselves. 00:01:21.600 --> 00:01:25.680 This allowed IBM to initially keep a stranglehold on the PC market, 00:01:25.760 --> 00:01:30.640 a far cry from what we're used to today, where you might find parts from dozens of manufacturers 00:01:30.640 --> 00:01:33.920 inside both home-built and store-bought computers. 00:01:33.920 --> 00:01:38.640 But as it became resource and time-consuming for IBM to do everything themselves, 00:01:38.640 --> 00:01:41.680 they started to include components from other companies, 00:01:41.680 --> 00:01:46.960 notably operating systems such as Microsoft's MS-DOS and CPUs from Intel. 00:01:46.960 --> 00:01:55.760 Now, IBM opening up their platform in this manner made it easier for other companies to start building systems they labeled IBM PC-compatible, 00:01:55.760 --> 00:01:58.880 often at a lower cost than Big Blue could do it. 00:01:58.880 --> 00:02:01.920 I like how we're calling IBM Big Blue. Big Blue! 00:02:01.920 --> 00:02:06.160 Soon enough, both PCs and their components were seen as commodity goods, 00:02:06.160 --> 00:02:11.120 instead of something special that consumers felt compelled to buy specifically from IBM. 00:02:11.120 --> 00:02:15.280 Once this happened, IBM's dominance began to evaporate. 00:02:15.280 --> 00:02:18.960 IBM's original business model, which relied on vertical integration, 00:02:19.040 --> 00:02:22.800 i.e., doing it all themselves, helped them become a dominant force, 00:02:22.800 --> 00:02:27.440 but was now actively working against them, especially in the PC space, 00:02:27.440 --> 00:02:31.680 as more successful companies were focusing on keeping their operations narrower. 00:02:31.680 --> 00:02:35.360 For example, specializing in only hard drives or processors 00:02:35.360 --> 00:02:42.080 instead of manufacturing complete systems. Of course, other companies such as Compact were also selling complete systems, 00:02:42.080 --> 00:02:47.680 but they enjoyed more success than IBM, as they didn't have to deal with the amount of sheer bloat 00:02:47.680 --> 00:02:51.520 that IBM took on from being such a vertically integrated business. 00:02:51.520 --> 00:02:56.320 And by 1990, many of IBM's divisions were operating on razor-thin margins, 00:02:56.320 --> 00:03:03.120 not just its PC operation. Making matters worse was that IBM wasn't exactly raking in the dough 00:03:03.120 --> 00:03:07.920 from other manufacturers licensing their technology for PC-compatible systems. 00:03:07.920 --> 00:03:13.600 Instead, competitors just ended up developing or adopting open standards that cut out IBM completely. 00:03:13.600 --> 00:03:19.280 As the 1990s dragged on, IBM felt even more pressure from companies like Dell, 00:03:19.280 --> 00:03:23.600 who marketed and sold directly to consumers cutting out the middleman. 00:03:23.600 --> 00:03:28.560 IBM PCs, on the other hand, were more commonly found in retail stores like Radio Shack. 00:03:28.560 --> 00:03:33.120 And like IBM's PC division, they also went the way of the dodo. 00:03:33.120 --> 00:03:38.160 By the time the mid-2000s arrived, it was even harder to make money selling pre-built PCs. 00:03:38.160 --> 00:03:43.360 As falling component costs and the perception that the PC was no longer an unattainable luxury, 00:03:43.440 --> 00:03:48.240 meant margins were slim for many manufacturers, but especially for IBM. 00:03:48.240 --> 00:03:53.600 Although Big Blue's CEO cited his opinion that they couldn't do much innovating in the PC space, 00:03:53.600 --> 00:04:02.000 they were also losing money hand over foot, leading them to sell off their PC operation to Lenovo after 25 years in the industry. 00:04:02.000 --> 00:04:06.800 But there's some good news for old IBM fans. Lenovo still sells the ThinkPad, 00:04:06.800 --> 00:04:12.000 complete with that little red mouse knob that'll take you on a nostalgia trip back to 1992. 00:04:12.000 --> 00:04:13.840 And confuse you a little along the way.