IBM is in talks to sell its personal computer manufacturing business which, if successful, would mark the end of an era in the brief history of the PC, a machine the company helped to invent.

It is understood that the company is in talks with at least two international PC makers about selling its personal computer business, including a Chinese company called Lenovo, according to Wall Street sources.

The sources confirmed speculation that the business, which includes its desktop computers and laptop divisions, is expected to fetch between $1 billion and $2 billion.

IBM declined to comment on what it described as a “market rumour”, which was first reported in The New York Times yesterday.

“We have nothing to say about this story at all,” Brian Doyle of IBM said. “We neither confirm nor deny such rumours.”

It was also understood that Merrill Lynch had been appointed as adviser to the possible sale but the investment bank also declined to comment. Shares of IBM shot up as the news filtered into the market. At lunchtime on Wall Street the shares were up nearly 2 per cent at $97.40 in anticipation that a deal could be struck as early as next week. The New York-based company, known as Big Blue, was a pioneer of the desktop computer, bringing the first to market in 1981 after striking a deal with a then little-known software engineer named Bill Gates.

IBM became so synonymous with the advancement of artificial intelligence that Arthur C Clarke, the science fiction writer, adapted its name for the novel 2001: A Space Odyssey.

The rogue computer that tries to kill its operators in the tale of machinery gone mad is called HAL, each letter being one away from IBM in the alphabet.

But over the past few years IBM’s dominance of the computer manufacturing market has slipped, as the familiar grey boxes have become a cheap commodity. The personal computer business today makes little profit for IBM.

So far this year the personal systems division of IBM, which includes PCs, retail solutions and printer systems, made $9.3 billion of revenues, or 13 per cent of the company's $68.8 billion total sales.

But profits of only $70 million make for a meagre 0.7 per cent margin in the business.

IBM has instead moved into the more lucrative arenas of consulting services, financial services and manufacturing big computer servers. The company bought the consulting arm of PriceWaterhouseCoopers in October 2002 for $3.5 billion.

The global services and financial services arms of IBM, accounted for some $45 billion of the company’s $89 billion of sales last year.

The divisions made some $12 billion of profit, which makes for a margin of around 26 per cent. IBM has slipped to number three in the global PC sales league, with just 6 per cent of the market share.

Dell is number one with 18 per cent while Hewlett Packard comes a close second with 16 per cent.