IBM Challenges Intel's Dominance in the PC Market

Strategic Insights -

As International Business Machines Corp. (IBM) begins to partner with smaller chip manufacturers, it is clear that the company is looking to challenge Intel Corp.'s dominance in the PC market. IBM's agreements with Advanced Micro Devices Inc. (AMD) and Integrated Device Technology Inc. (IDT) will allow the company to utilize its extra chip-making capacity, potentially blunting Intel's market share. With AMD's processors selling for 25 percent less than Intel's chips, IBM is taking a significant step towards becoming a major player in the market.

Key Takeaways:

  • IBM is partnering with AMD and IDT to utilize its extra chip-making capacity, which could challenge Intel's dominance in the PC market.
  • AMD's processors sell for 25 percent less than Intel's chips, which could be a major factor in Intel's decision to cut prices by more than 50 percent in the last year.
  • The partnership between IBM and AMD could be a result of IBM's desire to diversify its revenue streams and reduce its reliance on Intel, as Intel powers more than 85 percent of all PCs.
  • IBM's foundry business could be a major player in the market, as it has the capacity to produce chips for rival manufacturers and also has a ready supply of chips for its own machines.
  • The partnership between IBM and AMD could be a significant threat to Intel's market share, as IBM has a well-respected foundry business and is in a perfect position to help out the little guys, including National Semiconductor Corp.
  • Prudential Securities analyst Hans Mosesmann suggested that AMD is in talks with an unnamed company to take a 20 percent equity stake in the ailing chipmaker, with IBM being the most likely buyer.
  • IBM has had extra capacity in its foundries since last year, when Apple Computer Inc. stopped licensing clones of its Macintosh computers.

Statistics:

  • Intel has 11 chip-making plants around the world. (Source: Intel spokesman Tom Waldrop)
  • Intel has more than 85 percent of the microprocessor market. (Source: Intel spokesman Tom Waldrop)
  • AMD's processors sell for 25 percent less than Intel's chips. (Source: Unnamed source)
  • Intel has cut prices by more than 50 percent in the last year. (Source: Unnamed source)
  • IBM powers more than 85 percent of all PCs as its machines are powered by Intel and partner Microsoft Corp. (Source: Unnamed source)

Sources:

  • Gerstner, Louis (IBM Chairman and Chief Executive)
  • Albert, Sam (management consultant)
  • Scovel, Daniel (analyst at Fahnestock & Co.)
  • Mosesmann, Hans (Prudential Securities analyst)
  • Beerman, Tom (IBM spokesman)
  • Waldrop, Tom (Intel spokesman)
  • Unnamed source ( Intel's market share and pricing information)