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To: THE WATSONYOUTH who wrote (142953)	9/6/2001 1:47:24 PM
From: wanna_bmw	Respond to of 186894

TWY, Re: "My point in all of this is that the assumption that somehow standard high volume Itanium systems have to be far cheaper than correspondingly featured Power4 systems is FALSE." I know what you are trying to prove, and it is that the cost per Power4 system to IBM is not inherently more expensive than the cost per Itanium system to IBM. This is only true if you are considering the fixed costs of the componentry, either as it rolls of the assembly line, or as it's purchased directly from vendors such as Intel. However, this is not entirely correct, since there are additional costs built in to every Power4 system that IBM makes. Those costs have to do with the research and development of the CPU and system itself. For Itanium, Intel has done most of the work. If IBM wants to differentiate the platform, they can invest in that, but if they wanted, Intel pretty much already has everything at their disposal to buy and resell a nearly complete Itanium system (or at least the processor, platform, and enclosure). For Power4, that is all up to IBM to invest the time and money into creating the processor, platform, and enclosure. Not only that, but there is additional investments needed for tools, an OS, a compiler, etc. All these costs are not trivial, so you must include them into the "per system" cost comparison between an Itanium and Power4 system for IBM to sell. The is the same reason why Compaq gave up the Alpha and HP gave up the PA-RISC. Both architectures cost those companies more to keep up than to just buy a common platform from Intel. A couple years down the road, and we'll know whether that was a good business decision. Right now, your guess is no better than mine. wanna_bmw

To: THE WATSONYOUTH who wrote (142953)	9/6/2001 1:58:13 PM
From: John Hull	Read Replies (2) \| Respond to of 186894

WY- OK, i see your point. To date, IBM has not demostrated a desire to engage in a direct price comparison between their IA platforms and their RISC-based platforms. They have tried to maintain a price premium for their RISC platforms - which they have been able to do quite nicely as those customers tend to be more bound by previous software OS choices and substitution between architectures is difficult. By-the-way, a good portion of those healthy margins on SW and services come from supporting the same installed preference for those RISC architecture platforms. getting real aggressive on price for the HW here might encourage the customers to look for more agressive prices on the SW & Services too. Probably inevitable anyway, but not something IBM wants to accelerate. jh

To: THE WATSONYOUTH who wrote (142953)	9/6/2001 1:58:13 PM
From: John Hull	Respond to of 186894

WY- OK, i see your point. To date, IBM has not demonstrated a desire to engage in a direct price comparison between their IA platforms and their RISC-based platforms. They have tried to maintain a price premium for their RISC platforms - which they have been able to do quite nicely as those customers tend to be more bound by previous software OS choices and substitution between architectures is difficult. By-the-way, a good portion of those healthy margins on SW and services come from supporting the same installed preference for those RISC architecture platforms. getting real aggressive on price for the HW here might encourage the customers to look for more agressive prices on the SW & Services too. Probably inevitable anyway, but not something IBM wants to accelerate. jh