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.
|
|
||
|
|
||
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.
|
John Shinal is a technology editor for MarketWatch in San Francisco. Matt Andrejczak is a reporter for MarketWatch in San Francisco. |
|
|
||
|
|
|
|
This is no suprise. IBM is NOT a semiconductor company. To think they could swim in the same pond with Motorola, Intel and AMD is a bit arrogant -- but that is Big Blue to the core. This should be no suprise to informed stockholders.
If you want on or off the Mac Ping List, Freepmail me.
Do you know where that is? IBM is generally doing very well with its semiconductors. The POWER continues to be THE mainframe chip, the Cell is taking off like mad, and the PPC runs a lot of stuff. It just seems that the general purpose desktop PPC970, with Apple's relatively small volumes, wasn't interesting enough to IBM to keep developing up to par.
IBM has one of the best PR departments in the world. Starting with you.
Couldn't swim in the same pond with Motorola? Apple got on board with IBM for the g5 when motorola's powerpc roadmap stagnated. Not that production of the g5 has been smooth sailing but there are probably less problems than with the g4.
Apple was frustrated because IBM wouldn't produce another powerPC for notebooks, which they wouldn't do because the volumes wouldn't be enough to be interesting to IBM. whatever this says about IBM, it's not that IBM is too minor a player in semiconductors to keep Apple's business, more like the other way around.
IBM is generally doing very well with its semiconductors.
------
Regardless, with less than 1% of their revenue from semis, they are not a semiconductor company. IBMs is a computer and storage media company. I know -- I have been calling on them for over 25 years and know many folks there.
Lots of companies make some semi devices. And they are not semiconductor companies, per se.
Not to mention it's not even an exclusive IBM product. Sony and Toshiba also own 33% of the design, and will have their own fabrication facilities.
Kind of hard to be a great CPU and not be in production yet, don't you think? ;)
Nah, not really. It's been demonstrated, and there are some good vouchers for its ability.
Simultaneously decoding 42 SDTV signals is pretty damn impressive.
I can build you an ASIC to do exactly the same thing, which doesn't tell you anything about its value as a general-purpose processor. I'll believe the hype when the demo is done by someone other than the guy who wants to sell me one ;)
Well... they really don't want to sell you one unless you're buying a PS3, or own a large company.
A simple case of Deja Vu? Remember last time there was a new Playstation chip? Built by Silicon Graphics that time, it was going to dominate the world. Whatever happened to IT?
http://findarticles.com/p/articles/mi_m0CGN/is_3765/ai_56194746?cm_ven=YPI
"Kutaragi told the San Jose, California conference that enhanced versions of the SCE Graphics Synthesizer (GS) and Emotion Engine (EE) chips used in the PlayStation 2, will drive workstations able to run development tools 10 times faster than today's platforms, rising to 100 times and 1,000 times faster by 2001 and 2005."
Besides which, Motorola is no longer a chip company at all. They spun off their discrete business to On Technology and then the rest of their semiconductor business to FreeScale Semiconductor. After a disastrous decade, Motorola decided to focus on mobile phones instead of chips.
bttt
Motorola is no longer a chip company at all.
-----
By and large, you are correct. But at one time, they were truly a semiconductor company and recognized as such. That was my point. At the same time, they were/are a major supplier of radio systems of many types. As it was for many, the semi industry became TOO competitive and margins went away, to the point where it was not worth it. A market that went into over-supply worldwide.
True, semiconductors are a small part of their business, but with this statement: "To think they could swim in the same pond with Motorola, Intel and AMD is a bit arrogant" you seemed to say that IBM is not capable of competing. It is highly capable, it's only a matter of will.
Hard to imagine such a person. Anyone "informed" would not be a stockholder.
That right now is huge, just that means millions will be shipped. There is so much interest, and it has a lot of industry support (remember Toshiba's video demo?), that it can't fail. BTW, the processor in the upcoming XBox is IBM, and a close cousin to the Cell. The next Nintendo will also use a related IBM chip.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.