IBM Partners Bullish On Possible Sale Of Power Chip Business

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Partners say IBM's struggling Power processor business needs a boost, and that selling it off is the best option to drive down pricing on the expensive chips and attract new customers to the Power platform. They say Big Blue's Power processor needs a lifeline as the latest Intel Xeon processor and emerging server threats from ARM pose serious challenges to the Power server platform.

IBM partners are reacting to speculation that IBM is prepping its chip business for sale to GlobalFoundries. Buzz over the potential sale hit an all-time high this week when Bloomberg news reported that IBM was offering GlobalFoundries $1 billion to take the business unit off its hands. Bloomberg reported that GlobalFoundries balked at the deal, asking for $2 billion.

"If GlobalFoundries can bring more efficiency to the chip manufacturing process and bring down prices -- as I suspect they would -- than this is a win for partners, IBM and the Power platform," said an IBM business partner who asked not to be identified.

Related: IBM Counters Falling Hardware Sales By Open-Sourcing Power Server Line

GlobalFoundries, chip experts say, is at the top of the list of companies that can get the most out of IBM's chip business. Patrick Moorehead, president and principal analyst at Moor Insights and Strategy, said the United Arab Emirates-owned company is the world's second-largest chip maker with six fabs in Singapore, one in Germany and a $10 billion 300-millimeter fab under construction in Malta, N.Y.

"This would be in line with IBM's move to shed anything that isn't core to IBM's business moving forward," Moorehead said. "Most chip makers are fabless these days. That would help IBM keep costs down. The downside is they could lose control over the architecture, but it's not unforeseeable that IBM could be negotiated control into the sale price."

IBM's Power business has been struggling. Its market share, according to analysts, has slowly been dwindling as the industry has made sweeping changes to server architecture embracing AMD, ASIC, ARM, and, of course, Intel’s x86 architecture.

"Right now, Intel is the clear winner," said Moorehead.

Chris Pyle, president of Boca Raton, Fla.-based Champion Solutions Group, said, "I'm not sure it would make a bit of difference if IBM didn't make its own chips."

"IBM sold off its disk drive storage business years ago," Pyle said. "Did that stop me from selling hundreds of millions of dollars of storage devices with an IBM logo on it? No. Not one customer asked me, 'Hey, who actually manufactured what’s inside here?'"

Pyle said he is seeing IBM come under intense competition from x86 competitors such as AMD and Intel, which have been wooing his Power customers to build server architecture on less expensive commodity x86 architecture. 

NEXT: IBM Plots A Bright Future For Semiconductor Business 

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