UPDATED: The relatively close working relationship between IBM and AMD has frequently led to speculation about the two companies joining up via a merger, but the idea is always quickly dismissed by both sides.
Last week, the Financial Times threw a little gas on the fire with a lengthy story that cited unnamed sources who claimed the two companies are talking merger.
It would seem a good fit; both have huge facilities in Austin, Texas. AMD farms out some of its semiconductor manufacturing to IBM. Additionally, the two are jointly building a large fabrication facility in upstate New York.
The Times report didn’t give a timeframe nor a target price. Based on its $7.62 share price at press time on Tuesday, AMD’s market cap totaled $4.42 billion.
AMD and IBM both declined to comment on the story’s speculation. Various analysts contacted by InternetNews.com had differing opinions on the proposal, but did agree on a few things.
First off, it likely won’t happen.
“It doesn’t make any sense to me,” said industry analyst Jon Peddie. “I don’t see any win for IBM. If IBM wants to have a stake in AMD’s technology, they could just buy a hunk of stock, not raise the FTC’s eyebrows and exert influence that way.”
Added James Staten, senior analyst for Forrester Research, “I’d be surprised because of the size of the buy. That would be a heck of a big thing to swallow, and IBM tends to buy things that are big revenue and intellectual property gains.”
But Charles King, principal analyst for Pund-IT, thinks it might work.
“Right now, IBM has been very ambitious with what it’s been trying to do in the microprocessor space and had some great successes in the past couple of years in being an agnostic vendor of custom chip products,” he said.
According to King’s thinking, picking up AMD would give IBM an entrée into the high-performance/high-end market, where it has its own efforts around the Power architecture. It certainly doesn’t want to be in the commodity market; in recent years, IBM has sold off its PC business, its hard disk business and its printer business.
In fact, Peddie noted that most of IBM’s revenues stem from outside of the hardware business.
“If you look at where their revenue is coming from, they’re making all their money and putting all their investments into the software and services areas,” he said. “The idea of making an investment in another chip company doesn’t make sense to me.”
However, Staten saw a potential synergy for the two firms at the high end, similarly to what King described.
IBM’s Cell processor, which powers the Sony PlayStation 3 but is extremely powerful and being considered for use in supercomputers, is a fully programmable multi-core processor — so it would be possible to set up the eight cores to do one task.
Meanwhile, AMD is working on its own Fusion project, designed to put a GPU and CPU on the same die. As a result, the PCI Express bus where a video card typically goes would become free for a co-processor — and Cell would fit that bill nicely.
Staten imagines a scenario in which a Fusion-based system with a Cell co-processor would use one Cell core to do drive encryption and a second to encrypt network traffic, while a third compresses data for maximum network throughput. This would take a tremendous load off the CPU.
As it is, IBM and AMD have something in that vein already in the works; the Roadrunner supercomputer being built with Los Alamos National Lab. It will incorporate Opteron and Cell processors in a petaflop design.
“That’s keeping with the Fusion vision that AMD has,” Staten said. “They talk of heterogeneous cores in the same processor, but they haven’t talked beyond AMD and ATI cores.”
And IBM has talked about Cell-based systems, but don’t have an x86 instruction set to apply to the Cell and get the performance that they need,” he added.
Still, many analysts agreed that it would be tough to get this one past IBM shareholders, especially since AMD’s star hasn’t exactly been shining as of late.
“It would be a significant payout, and I think given the problems AMD has been having, it would be a tough sell to make,” King said.
Corrects the location of the Roadrunner supercomputer.