Replies to post #44553 on Intel Corp (INTC)

[chipguy]

I think it's a distinct possibility that a lot is cooking between IBM and AMD.... Would IBM want AMD going over to PE? Would IBM want/let AMD fail? And what about the announced socket synergy of Power and AMD? What about the process technology?

1) Would IBM want to declare war on Intel? IBM has bumped
up against Intel a few times in mass market processors, x86
and otherwise, and got badly burnt.

2) The clear evolutionary trend of IBM the corporation is to
gradually move away from hardware to software and services.
Over the years IBM has stopped making DRAM, disk drives,
printers, telecom switches, and PCs. Picking up where AMD
fell in battle is completely contrary to IBM's strategic direction
for nearly two decades.

[wbmw]

Re: Would IBM want/let AMD fail?

This speculation in my opinion is a little ridiculous. I saw this a few times on SI that maybe IBM would buy them out, in order to protect choice in the processor market. Say, what...?

Since when has IBM ever attempted a money losing proposition, except for IBM Micro, which allowed them to make use of advanced process technology their Power processor line?

Think about it. It would cost them $10B at least for AMD, and that doesn't count the money it would take to turn the company profitable. Even if they subsidized all the sales by transitioning their entire product line to AMD processors and gave it the IBM seal of approval, it's not like they can instantaneously deliver all of those necessary designs. Many IBM servers have custom chipsets that offer specialized features that their customers are used to. The transition could take years, during while AMD could lose another few billion dollars.

And what then? Assuming Intel doesn't stumble (and I don't know of any logical business decision that assumes that they will), how long after AMD turns profitable will it take IBM to recover the 10+ billion dollars of investment?

And meanwhile, if they accept the alternative Intel monopoly, how long would it take hypothetical insane monopolistic pricing before IBM ends up paying the equivalent 10+ billion dollars for overpriced Intel processors? It's not like Intel can even raise prices too significantly in the lack of competition, given price elasticity.

I've concluded that there are absolutely no business prospects in IBM buying out AMD. With the margins that IBM gets on their server products, they can pretty much continue buying Intel indefinitely. After all, if Intel were to raise prices, it would be a zero sum game. All OEMs would be impacted in the same way, and IBM isn't necessarily held at a disadvantage. On the other hand, if IBM buys AMD while Intel executes, they could be faced with competitive challenges.

Furthermore, I don't think IBM's business is suited at all for low margin or low cost businesses. It would pull down IBM's overall margins, and their stock would plummet. And with IBM's more expensive boutique process techniques, I can't see how they could beat Intel in costs. It could conceivably be a disaster for them.

But that's just my opinion....

[imho]

smooth2o,

I think it's a distinct possibility that a lot is cooking between IBM and AMD

The thing I come away with, after seeing all the IBM-AMD talk, is that it is AMD talking and not IBM. This tells me that AMD is making a public "plea" that they are available for "whatever" will save their sorry state of existence. Their selection of NY for a fab is the most obvious example that they are specifically eyeing IBM, so I can see your point. A pig wearing lipstick is still a pig. Does IBM have good eyesight? That is the question.

IMHO

[tecate]

I don't follow your logic.