To: Jules B. Garfunkel who wrote (6476 ) 6/23/2000 5:21:00 PM From: Arrow Hd. Read Replies (1) | Respond to
They will be significant customers both ways. The server issue is somewhat different. IBM is not going to give up developing their own chips. If you are going to be a top to bottom technology company in control of your own destiny then you have to control the food chain and nothing represents that more than chips. IBM has always been the largest chip maker for Servers but it does not get recognized since they are used internally for machine manufacturing and OEM which has limited external visibility due to contract confidentiality. And this is the best way to preserve margins and/or be the low cost and priced manufacturer. You don't have that leverage when you buy from an OEM, only when you manufacture yourself and spread costs through a secondary channel such as OEM. That is why I never agreed with your "Intel takes over the server world" argument. That would be a loosing business model for IBM and IBM has the technology development to do otherwise and so that is what they do. Using mainframes as an example, IBM's margins have been reduced because of price attrition due to competition from outside the platform (Wintel, Sun, HP, etc.) and from within the platform (Hitachi, Amdahl, Fujitsu, etc.) Acceptance of IBM products has never been higher. Mainframe MIPs have never, ever, grown this quickly in such a short time but the K per MIP is coming down every quarter. So it is not from selling someone else's lower margined products it is price attrition. Fix price attrition and you will be the new technology genius for this century. You will also kill the economic expansion since technology price/performance is what drives productivity but that is another subject.
