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IBM Sells Chip Business, Declines Continue
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D. Henschen
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D. Henschen,
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10/21/2014 | 11:38:00 AM
Re: is 10nm small enough?
No, 10nm is not small enough. That's another reason IBM unloaded its facilities to GlobalFoundries. The next-gen chips IBM is researching will be 7nm and smaller and will require alternatives to conventional silicon and silicon-on-copper capabilities of these existing plants. The next-gen will demand new manufacturing techniques such as carbon nanotubes or some such exotic material that has yet to be brought into full-scale production.
Charlie Babcock
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Charlie Babcock,
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10/20/2014 | 5:38:36 PM
IBM subsidizes offloading of chip business
I could have explained that comment a little more. The subsidy carries on for three years. How much extra capacity beyond serving IBM's needs will GlobalFoundries maintain for the Power architecture after three years? That is, if you gamble on Power as a third party cloud service provider, and need a server refresh every three years, won't additional large scale buyers have to materialize to keep GlobalFoundries in full production? And if they don't, will GlobalF be willing to maintain capacity beyond IBM's needs? Won't it seek to avoid losing money on the Power architecture after three years? How might it do so? Most cloud builders will be wary of the uncertainty contained in that outlook.  
D. Henschen
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D. Henschen,
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10/20/2014 | 5:05:39 PM
Re: IBM handicaps futue of Power in the cloud
I'm not sure what you mean by three years. There's a 10-year committment for GlobalFoundaries to supply chips to IBM.
Charlie Babcock
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Charlie Babcock,
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10/20/2014 | 4:51:38 PM
IBM handicaps futue of Power in the cloud
The Power architecture has many server attributes that x86 does not. IBM has been trying to convince cloud service providers that Power offers a more cost effective server for the amount of work done than Intel. This was a steep hill to climb before, and so far, only the European service provider, OVH.com, has bitten on Power8 servers. By paying GlobalFoundries to take on its chip manufacturing oblications for the next three years, it's introduced a big yellow flag into the field of vision of any other cloud providers considering the same option. It's got a money-losing operation off the books three years sooner than it might have otherwise, but it also wounded the future prospects of its architecture. Builders of 300,000-server cloud centers hate uncertainty. 
D. Henschen
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D. Henschen,
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10/20/2014 | 3:52:18 PM
When is a "sale" not a sale
It was very strange to hear IBM describe this deal as the "sale" of its chip-manufacturing buisness. IBM had to pay GlobalFoundries because the latter is guaranteeing availability of chips while IBM may not be able to offer much assurance that demand for those chips will hold up.

The Power server line, in particular, has been hard hit, partly because Z system mainframes in recent years have added the ability to emulate the Power enviornment and consolidate those data-processing workloads. That's like robbing Peter to pay Paul, and I'm guessing it hasn't been a move that has won universal support within IBM.
Thomas Claburn
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Thomas Claburn,
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10/20/2014 | 3:43:33 PM
Paying to be rid of a company
How often is it that companies pay to have assets taken of their hands?
D. Henschen
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D. Henschen,
User Rank: Author
10/20/2014 | 2:28:21 PM
Re: Bad Comparison
Before they stopped splitting out software revenue, Oracle revenue was still 50% database. If you add MySQL and all the BI, big data, and data-management middleware, I'd guess that's still half or more of the business.
D. Henschen
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D. Henschen,
User Rank: Author
10/20/2014 | 2:12:36 PM
Re: Bad Comparison
Oracle is not "primarily an ERP vendor." Oracle is primarily a database and data-management vendor, but it also has a sizeble applications business and, like IBM, a hardware business. Hardware is struggling at both companies, but IBM's business has had steeper declines. While Oracle's database and data-management business is growing, the latest quarterly stats show IBM's information management business is declining.

SAP is primarily an ERP vendor, as you say, but like IBM it also has a sizeable analytics business and is trying to shift from on-premises-dominated software sales to cloud services. IBM's long-standing software of the last decade of staying away from apps in favor of middleware has not served it well in a cloud era hin which people want read-to-run apps in the cloud. In other words, it only wishes it had more apps to bring to the cloud at this point. There are lots of point solutions among those "100+" SaaS offerings IBM has in the cloud.

 


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