Posted on 06/06/2005 4:45:36 PM PDT by Ernest_at_the_Beach
SAN FRANCISCO (MarketWatch) -- Apple Computer Inc.'s decision to use PC chips made by Intel Corp. may not have as great an impact on current chip supplier International Business Machines Corp. as some investors might suppose at first glance.
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That's because IBM
(IBM: news, chart, profile) has been shifting its emphasis in recent years away from PC chips to those used to power other types of devices, especially video-game players, several analysts wrote Monday.
IBM is supplying the microprocessors that will act as the brains for the next generation of best-selling game consoles, including Microsoft's Xbox 360, (MSFT: news, chart, profile)
Sony's PlayStation 3
(SNE:
and Nintendo's
Even though the average selling prices of those chips are estimated to be lower than those sold to Apple
(AAPL: news, chart, profile) , the volume of shipments should more than exceed the loss of business to Apple, according to reports from both Goldman Sachs and Deutsche Bank Securities.
"Despite the potential customer loss, IBM's ramp of video-game business over the next year will likely far exceed the loss of Apple business," Deutsche Bank analyst Chris Whitmore said.
Deutsche Bank estimates IBM will sell its gaming chips for about $100 on average. It sells its chip to Apple for roughly $150 on average. See full story on Apple's switch to Intel chips.
Investors more skeptical
At the same time, some investors said IBM's loss of a longtime customer points up some broad problems at the computer industry giant.
The news that Apple is dumping IBM as its PC-chip supplier after more than a decade comes just six months after IBM sold its own PC unit, which struggled to make a profit, to Chinese rival Lenovo.
To be sure, sales at IBM's semiconductor unit won't be helped by comments from Apple Chief Executive Steve Jobs that his company judged the performance of Intel's chips as superior to IBM's.
"If they're [Apple] switching suppliers, obviously there were some issues that came up they [IBM] couldn't work out," said fund manager Jim Huguet of the TA Idex Great Companies Fund (IGAAX: news, chart, profile)
. His fund sold its IBM shares last month.
IBM's chip unit was expected to generate $300 million in sales, or 13% of its revenue, from sales of Apple chips, up from $248 million, or 12% of chip sales, in 2004.
Although Intel-powered Apple PCs won't be released for at least another year, those numbers may prove optimistic if some potential Apple customers delay their purchases over concerns about future product compatibility.
"There is a reason why Apple is going away, and that's because they [IBM] weren't able to satisfy a longtime customer," said Fred Hickey, who runs the High Tech Strategist newsletter. IBM, he added, will "try to portray it as not a loss, but it is."
Small part of IBM's sales
Nevertheless, IBM's chip sales to Apple contribute less than 1% of IBM's total revenue of $99 billion, suggesting the financial impact of Apple's decision will be minimal.
"The headline risk is greater than the actual risk," wrote Goldman Sachs analyst Laura Conigliaro, who left her 2005 profit estimates for IBM unchanged.
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John Shinal is a technology editor for MarketWatch in San Francisco. Matt Andrejczak is a reporter for MarketWatch in San Francisco. |
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The fact that Toshiba is a Cell partner, and has already demonstrated a Cell pushing multiple video streams with insane efficiency, shows that the Cell will appear widely in various consumer video devices. Sony is also a partner and makes consumer video devices. Figure it out. Cell is the new DSP.
It's also shown potential in supercomputing, but I don't know how well that will take off.
The Cell has nothing to do with the PowerPC. Completely separate technology branch.
The head node of the cell is essentially an early PowerPC.
Xbox360 and the Revolution both use standard PowerPCs, yes
Read on the XBox more. IBM isn't keeping Cell technology completely within the Cell line.
Anything to do with video. They have big plans for digital content creation.
This is different from it being a PPC family member. I have no doubt that IBM used some of their technology base from the PPC to get the Cell going, but it's intellectually dishonest to claim the Cell as a part of the PPC line
You'll notice the 64-bit PPC running the cells. Each cell is a lot like a PPC 601, except that it's geared towards vector processing (vector ALUs instead of fixed-point ALUs) and has local memory instead of an L1 cache. So, basically, the Cell is a repackaging of the PPC line, and indeed going back to the basics of RISC that the PPC line was founded on.
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