Sunday, January 27, 2008

IBM Could Take Over Advanced Micro Devices: Rumours Resurrect

Advanced Micro Devices and IBM Corp.’s microelectronics division may establish “a more formal” chip relationship with merger possible going forward, some analysts say. But others completely disagree and are sure that this will not happen. Even though the deal makes sense in several ways, this will be absolutely against IBM’s strategy in the recent years. Or won’t?

The speculation about possible takeover of the world’s second largest supplier of x86 microprocessors by the world’s leading IT conglomerate resurrected in a Financial Times article provided by analysts from MergerMarket.com web-site. Despite of the fact that IBM has been withdrawing from any kind of manufacturing for years, the observers believe that it still makes sense for IBM to acquire Advanced Micro Devices, which has not reported profits for many quarters.

“An IBM Microelectronics/AMD deal would foster IBM’s continued move into technology services and away from hardware, while allowing it to retain hands-on management of a vital part of the computer industry, especially as chipmakers move to nanotechnology,” sources familiar with the matter are reported to have said.

Back in the days IBM used to make personal computers, hard disk drives, printers, monitors, x86 microprocessors used to develop operating systems. Nowadays all of the aforementioned was either sold to other companies, or transformed completely.

But it does not mean that IBM does not approach mass market with its products and technologies: all three new-generation game consoles – Microsoft Xbox 360, Nintendo Wii and Sony PlayStation 3 – either have an IBM-designed PowerPC-derivative inside (Wii, Xbox 360), or sport IBM co-designed chip (PS3). Several years ago IBM also wanted to provide its PowerPC technology to consumer electronics makers, but not a lot of companies actually adopted it. In fact, in order to sell its IT services and server products IBM needs to ensure that there is a significant number of clients out there.

Advanced Micro Devices may not only enable IBM with comprehensive lineup of x86 central processing units for personal computers, but may also provide a product roadmap for both well-developed and developing markets. More importantly, after the acquisition of ATI Technologies the CPU maker gained access to graphics technologies as well as stream computing initiatives.

Modern graphics processors have hundreds of tiny computing engines and could challenge Intel’s “teraflop initiative” processor with 80 or more x86 cores, particularly in video game space.

While the potential deal between AMD and IBM has numerous pros and cons, it should be noted that in case IBM acquires AMD, it will need to compete directly with Intel Corp., Nvidia Corp., Sun Microsystems and, perhaps, all the companies who make servers based on AMD processors today and rival IBM’s machines, including HP and Dell.

Neither AMD, nor IBM commented on the news-story.

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