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IBM – The Unhappiest Company in the World?

Apple has invented a computer that was aimed at home and office users, something which big companies did not consider to become multi-billion dollar industry in a few decades. IBM was the only one who decided to go the same route and at last invented the thing we know as IBM PC right now. Since the produce quickly became popular among third-party PC makers, IBM decided to offer something, which was not an open standard, in order to gain control over the emerging market in the mid-eighties. Unfortunately for the company, its PS/2 system has never become popular and International Business Machines has been losing PC market share gradually, which eventually led to selling off its PC business unit to Chinese Lenovo Group in late 2004.

Standing in front of its sold PC business unit, the business which was inspired by IBM, and without any future with its PowerPC architecture in the desktop PCs, IBM may seem to be the unhappiest company at this point among all the involved into the Apple-IBM-Intel intrigue. The outcome of Apple’s decision to switch to microprocessors made by Intel Corp. may be rather significant, as not only Apple and Intel are affected, but also companies like IBM and Freescale. Furthermore, Apple’s abandon of IBM’s chips may influence IBM’s processor business strategy. But analysts believe that IBM is really not that affected.

“What will happen to IBM's CPU business? Will they just scrap a lineup of desktop chips? Not likely,” mulls Jon Peddie, principal analyst at Jon Peddie Research.

The fact that IBM can’t get the PowerPC to 3GHz and it can’t manage the power issues indicates real problems in IBM’s processor process. IBM is building processors for Microsoft, Nintendo, and Sony; what are the implications for them? Apple’s defection eliminates a competitor for IBM’s limited engineering capacity so the move might actually be beneficial for those projects and those companies have contributed considerably more resources, claims Jon Peddie.

The analyst thinks that the move does have an impact on Freescale which is producing the PowerPC for Apple. Unless IBM and Freescale can quickly come up with another customer for the G5, Freescale will probably discontinue the product. In addition, The PowerPC G5 uses the execution core of IBM’s 64-bit Power series processors, which are used by IBM’s for their eBusiness servers, however, IBM builds that chip and that product will probably continue.

Petrov Group head analyst Boris Petrov thinks that not Apple’s disappointment in the PowerPC, but IBM’s business approach was the reason for the former to switch to Intel Corp.’s chips.

“We believe that this departure should have been expected since Apple and IBM have different roadmaps. IBM is no longer in PC business and who really ‘ditched’ whom is not clear,” Boris Petrov claims.

“IBM no longer sells standard products – Apple’s processor was the last product. IBM’s exit from semiconductor products started several years ago and is now fully completed,” Mr. Petrov believes.

The analyst thinks that the Cell processor is important but that is now done and over. However, Power architecture and Linux continue to be critical fuel to IBM’s corporate revenue growth – from $100 billion to $200 billion in the next ten years, according to Petrov Group.

“We believe that Cellular Computing concept approach, of which the Cell is only a small part, is the direction of IBM. Apple and PCs are, therefore, on different path from IBM’s – at present,” Mr. Petrov said.

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