The VAR Guy

January 24, 2008

2 Min Read
Five Reasons IBM Won't Buy AMD

Well, the rumors are circulating. MergerMarket is speculating that IBM may ink a tight relationship with AMD — or perhaps event purchase AMD. No doubt, AMD has some great technology and IBM would gain value through a close strategic relationship. But IBM buy AMD? The VAR Guy doubts IBM would make that move. Here are five reasons why.

First, some background: The VAR Guy has strong respect for AMD. He moderated a few CIO events for the company in 2005, and learned quite a bit about the company’s Optimum processors along the way. Yes, AMD has some intriguing technology and the company’s stock is depressed. That doesn’t mean IBM is going to step in and buy AMD. Here are 5 reasons why.

5. Remember PowerPC: In the 1990s, IBM aligned itself with Apple and Motorola, and the trio launched the PowerPC processor in a bid to upend Intel. PowerPC enjoyed some key areas of success, but it never really challenged Intel on the desktop. After learning how difficult it is to compete with Intel in the mass PC processor market, would IBM really want to launch a new volume processor war against Intel? The VAR Guy thinks that’s doubtful.

4. Software and Services: Just about every hardware company — HP, IBM, Sun, EMC — has pushed much deeper into software and services to grow revenues. Software is a high-margin business. Services lead to recurring revenue. In the microprocessor market, you need to cannibalize your own products every few months just to make a decent living.

3. Server Friction: AMD’s key server OEMs now include Dell, Hewlett-Packard, IBM and Sun Microsystems. If IBM owned AMD, would Dell, Hewlett-Packard and Sun continue to make high-volume purchases from AMD?

2. Lenovo: Remember, IBM got out of the PC market because the company couldn’t turn a profit with PCs — even with the popular ThinkPad brand. Buying AMD would mean getting back into a very unpredictable market.

1. Intel: Why would IBM want to clash so directly with such a hyper-aggressive company?

Of course, The VAR Guy is going to wind up eating more crow (he’s been doing a lot of that lately) if IBM does acquire AMD. A close IBM-AMD relationship seems reasonable, but IBM buying AMD sounds far fetched to our resident blogger. Here’s a look at the MergerMarket’s IBM-AMD speculation, which initially was picked up by Financial Times. When asked about a possible IBM deal, an AMD spokesman issued a “no comment” to MarketWatch.

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