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IBM Businesses Hardware

IBM Looking To Sell Its Semiconductor Business 195

Posted by Soulskill from the offloading-all-the-hardware dept.
jfruh writes "Having already gotten out of the low-end server market, IBM appears to be trying to get out of the chip business as well. The company currently manufactures Power Architecture chips for its own use and for other customers. Big Blue wants to sell off its manufacturing operations, but will continue to design its own chips."
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IBM Looking To Sell Its Semiconductor Business More

IBM Looking To Sell Its Semiconductor Business

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  • That's a surprise move (Score:5, Interesting)

    by cold fjord ( 826450 ) on Friday February 07, 2014 @11:19AM (#46186761)

    I thought IBM was able to leverage their detailed knowledge of their semiconductor processes to squeeze every bit of performance they can out of their Power architecture designs, and even tweak the processes to aid them. I doubt they will have enough volume for another company to do much of that unless they are willing to pay.

    • Re:That's a surprise move (Score:5, Interesting)

      by fuzzyfuzzyfungus ( 1223518 ) on Friday February 07, 2014 @11:37AM (#46186953) Journal
      It also seems a bit weird because the merchant foundry business isn't exactly facing a worldwide shortage of fabless companies, or demand for their designs burned into silicon(and, unlike AMD, IBM isn't having its face held underwater and being allowed to flop around just enough to satisfy the FTC, so they presumably aren't facing an impossible capital crunch). I'd also assume that IBM would be better placed than many to grab the (probably low volume; but nice margin) Must Be Red, White, and Blue and More American Than Mom's Apple Pie fab jobs. They've got domestic facilities, and have been doing assorted DoD and fed work longer than most of us have been alive.

      Have they recently acquired new executives that are hellbent on selling absolutely everything that isn't mainframes and $$$$$/hour consultants?

      • Re:That's a surprise move (Score:5, Informative)

        by afidel ( 530433 ) on Friday February 07, 2014 @11:44AM (#46187027)

        Have they recently acquired new executives that are hellbent on selling absolutely everything that isn't mainframes and $$$$$/hour consultants?

        Yes, their previous CEO made a stupid goal of $20 operating EPS by 2015 [ibm.com] and the new CEO seems to be hell bent on hitting that target, whether that's from an incentive program or ego talking I'm not sure.

        • Re: (Score:2)

          by Reziac ( 43301 ) *

          Hmm. I think IBM stock might be in for another crash, temporary but significant, just like it did 20-some years ago.

      • Re:That's a surprise move (Score:5, Interesting)

        by mlts ( 1038732 ) on Friday February 07, 2014 @11:51AM (#46187091)

        I just don't get IBM's motive. In the past, they were a one stop shop for a business. Yes, expensive, but no matter what broke, be it software, hardware, or the application, the IBM CE either could fix, or could get someone on the line who would be able to deal with the problem.

        Then they sold most everything.

        Other than becoming a new EDS with mainframes, what is IBM going to gain by this long-term strategy? Each market they hand over is one that could end up a bonanza should a trend change in the IT world. Storage and SSD come to mind.

        Going to just mainframes won't help much -- zSeries machines are still the best hardware out there, but not everyone needs Parallel Sysplex, and a lot of companies are moving to Facebook's model of running with a craptastic generic hardware stack, with all the redundancy in the backend application programming.

        PS: #insert grumble about beta here.

        • > I just don't get IBM's motive. In the past, they were a one stop shop for a business.
          > Yes, expensive, but no matter what broke, be it software, hardware, or the application,
          > the IBM CE either could fix, or could get someone on the line who would be able to deal with the problem.

          Given that IBM is selling or has sold it's Microcomputer business, it's Server hardware business, and now it's Semiconductor business . . .

          . . . and given IBM's recent patent lawsuit against Twitter . . .

          maybe

          • maybe IBM is getting into the Patent Trolling business?

            They've been in that business for decades. I read one of the Sun founders talking about the shakedown they got from IBM around 30 years ago.

          • maybe IBM is getting into the Patent Trolling business?

            This is remarkably insightful.

            Selling products and services is boring. The protection racket ("pay us and we won't sue you") should be similarly lucrative, with less overhead.

        • Nowadays IBM is just an IT consulting company. Good for them that they have realized it fast enough and got rid of all the ballast.

        • Re: (Score:2)

          by waveman ( 66141 )

          > long-term

          I see the subtle flaw in your thinking. Anything that happens post the current CEO's tenure is discounted to zero. If doing this would cause the earth to fall into the Sun in 10 years, it would still happen.

      • I think you can still do that – IBM engineers sitting down with the foundry engineers.

        The problem is that the fab plants are really big and massively efficient. IIRC Intel said that would only need to build a single (billion dollar?) fab plant for its next generation of chips. They are going to build more than that because they don’t want all of their eggs in one basket but you get the idea. At some point it is the costs of out outsourcing the production is going to be less than the costs of run

      • According to the Lego Movie $$$$ is $37 for coffee. So $$$$$ should be what?

        Come on nerds!! This stuff matters!!

    • Re:That's a surprise move (Score:5, Insightful)

      by unixisc ( 2429386 ) on Friday February 07, 2014 @01:02PM (#46187817)

      This is sad. I remember when IBM came out w/ some great innovations like the copper process. It's also disappointing to see even fewer, rather than more fabs. Yeah, I know that the costs are astronomical, but converting such a market into an Intel monopoly is a cause for concern

      Also, once that's gone, it will be the end of the road for Power as well: as it is, Freescale has all but abandoned it, the console guys have abandoned it and now it's IBM itself. An independent fab won't free up space for IBM's Power if there are more lucrative chips available - particularly in volume. Only reason SPARC is alive is really Fujitsu, and Itanic is almost dead. Power being gone would leave only MIPS for the embedded space, and Xeon/Opteron for the server space. I doubt that ARM8 will have a significant role there.

    • It's also very expensive to run a fab if you don't have the volumes to run it at full capacity.
      You've also got to keep pumping in billions to keep up with the latest in process technology. Again, not worth it without the volume. They've lost Apple products to Intel and the XBox 360, and the PS3 successors have gone to AMD.

  • Beta delenda est! (Score:4, Insightful)

    by emmagsachs ( 1024119 ) on Friday February 07, 2014 @11:23AM (#46186823)

    Nobody buys Playboy for the articles. They do it for the hot, nude women (sadly, sans grits). It just so happens that /. is exactly the same. No one reads /. for the articles. The articles were news two days ago. And no one reads /. for the summaries. The summaries are almost always wrong.

    Everyone reads /. for the comments. The comments are the /. equivalent of Playboy's naked chicks, with one crucial difference. Without the gentlemen at Playboy, there will be no naked chicks to look at. The service they provide is, for the most part, finding women that will agree to pose nude for pictures, which they most graciously distribute to their readers.

    But as for Slashdot -- the good people at Dice and their "editorial" team do diddly squat around here to generate content. The articles, old as they may be, are submitted by the users. The summaries, mistaken as they may be, are provided by the users, not by Timothy, Soulskill, et al. The comments, trollish as they may be, are written by the users.

    /. is of the users, by the users, for the users. The only people at Dice who deserve their paycheck are the IT people. The rest of you -- what is it that you do for our benefit? Why the hell do we need you clowns? Your music's bad and you should feel bad!

    Beta delenda est!

    • Re: (Score:2)

      by arth1 ( 260657 )

      Nobody buys Playboy for the articles. They do it for the hot, nude women (sadly, sans grits). It just so happens that /. is exactly the same.

      Yes, but we have grits.

      And forks. Just sayin' If the pitchforks won't win, the code fork will.

    • I thought with the onset of internet porn, people who keep buying playboy are actually doing it for the articles.

      And lets get real, the babes in there aren't that hot.

  • What's left? (Score:4, Interesting)

    by MobyDisk ( 75490 ) on Friday February 07, 2014 @11:23AM (#46186825) Homepage

    I know of IBM as a:
    - Desktop PC manufacturer
    - Server manufacturer
    - Chip manufacturer

    If they don't have those 3 things any more, then what are they? To my knowledge, IBM has some of the best fabs in the world. It's amazing to me that this is not part of their core business. This is... wow... just wow.

    • Re:What's left? (Score:5, Informative)

      by Doug Otto ( 2821601 ) on Friday February 07, 2014 @11:26AM (#46186851)
      IBM is primarily a professional services company. They've been evolving into that for years.
      • Comment removed based on user account deletion

      • from what I can tell, much (most?) of ibm, these days, is all outsourced labor. I have never, once, gotton a reply to a job posting from IBM. not even a thankyou letter for applying. and I've applied to some jobs that were a near copy of my resume/background. problem is: I'm US born and raised and therefore, not 'cheap labor' for them.

        IBM fired a lot of US folks a few yrs ago and sent all the jobs to india.

        IBM can go fuck themselves, for all I care, now.

    • They have a large consulting arm - IBM Global Services. (Not sure if that is still the name.)

    • Re:What's left? (Score:5, Funny)

      by Third Position ( 1725934 ) on Friday February 07, 2014 @11:28AM (#46186867)

      Kind of like watching fingers fall off of a leper, isn't it?

      • That. That's about the image that got on my head.

        Except that they claim to be healty.

        Beta addendum: I'm waiting for an anouncement that classic won't go away, if it does not come, count me back into the complaining crowd.

    • Re: (Score:2)

      by alen ( 225700 )

      they sell lots of overpriced software like Cognos that is a huge PITA to set up, use, support and you need a maintenance contract since the documentation is crappola

      dozens and dozens of other business software that they sell including 2 different database products that no one seems to use.

      • Re: (Score:2)

        by bored ( 40072 )

        they sell lots of overpriced software like Cognos that is a huge PITA to set up, use, support and you need a maintenance contract since the documentation is crappola

        That pretty much describes the entire mainframe business. The technology has evolved but its still managed like it was in the 1970's, which as you can imagine is a nightmare. Imagine a modern piece of hardware with hundreds of CPUs/etc managed like a early 80's era DOS machine where you have a:-zz:, have to set all the IRQ's of your hundreds of

    • Re: (Score:3)

      by moogla ( 118134 )

      IBM's consulting services and design expertise on the big iron side is where all the money is. All the money in that they are the highest margin portions of the business and they get to set prices (very little meaningful competition, lots of opportunity for lockin)

      I'd love to explain it by way of analogy, but I don't want to stretch the concept of the fuck beta too thin, and car analogies are so last decade. Let's just say IBM wants to advise you on how you can escape from slashdot beta into their loving ar

    • IBM has a huge software group.

    • They are spending a huge amount of money on advancing Watson right now. The intention seems obvious to me: Advance the technology to the point where, even if not a true science-fictiony AI, it can be applied to solving a lot of practical business situations. Then sell Watson not as a product but as a service - the technology isn't going to be usable without some highly trained specialists to maintain it. Think call-center positions: A rack of servers running it could take the place of hundreds of front-line

      • I am eagerly awaiting the day when Watson is capable enough to replace 93% of doctors and lawyers. What's good for the plebs is good for the elite, right?
        • But will 1000 Watsons chained together and tossed into the ocean be as easily defined as a "good start" ..?

        • I am eagerly awaiting the day when Watson is capable enough to replace 93% of doctors and lawyers. What's good for the plebs is good for the elite, right?

          Capable and will are two different things. Both of those groups have very good unions (oops, I meant professional organizations).

        • It coul happen. If a Watson-based program can automate just the more routine aspects of the job, and do so better than an army of clerks, then it may allow a lawyer to handle twice as many cases at once. Which means half as many lawyers needed.

          • Re: (Score:2)

            by mikael ( 484 )

            Or it allows twice a many cases to conducted for half the price. The only limit on litigation in the past has been the expense of lawyers. In the UK, we have "ambulance chasers", "no win, no fee" lawyers who look for every opportunity to win a compensation payout.

    • > If they don't have those 3 things any more, then what are they?

      A major patent holder. I hear the patent trolling business is a growth industry.

    • I know of IBM as a:
      - Desktop PC manufacturer
      - Server manufacturer
      - Chip manufacturer

      You're describing IBM as they existed 20 years ago. They haven't been primarily a manufacturing company for quite some time now. Technical and business services is the core of the company as it exists today. They still make some products (hardware and software) but they are high margin products with significant support requirements.

    • According to Motley Fool [fool.com], only 14% of IBM's sales are from hardware. And that 14% is including the x86 server business that they just sold. And yet, between 2002 and 2012, their sales grew 28% and their earnings per share grew a whopping 7x (total earnings grew much less because of huge share buybacks, but it's earnings per share that matter). IBM is a software and services company. They keep selling some "big iron" to promote lock-in for their software and services - essentially their hardware is the c

  • IBM helped the Nazis with the punchcard technology used to keep track of prisoners in concentration camps during WWII:

    http://en.wikipedia.org/wiki/I... [wikipedia.org]

    • At least they built something.

      Oh and you forget, IBM has sold to anybody and in some cases with the Nod of the US government. This includes the Shah of Iran but lots of US companies dealt with the Nazis (Ford, ITT, US Steel etc.) It was just good business back then.

    • . . . the same Nazis that later helped us later to get to the moon:

      "The Russians put our camera made by our German scientists and your film made by your German scientists into their satellite made by their German scientists.

    • Re: (Score:2)

      by dryeo ( 100693 )

      Racism including antisemitism was quite acceptable before WW2 all over the west. Hitler tried a few solutions before finalizing on the "final solution" starting out with simply exiling the undesirables. No one took them in, there were ship loads of Jews traveling around the worlds oceans looking for a country that would let them in and none did. This was one of the reasons that the final solution was considered acceptable, if other countries cared, they would have welcomed the undesirables.
      Things haven't ch

  • Selling hardware, semi conductors - moving from proprietary OSs to linux. Are they just going to be another consultancy group?

    • Yup. But in charmingly short-sighted MBA think, all they know is what types of products have higher profit margins right now. Sell those off and for a while the companies finances will be better in the short term. What they don't realize is that sometimes those lower profit margin things give them an edge in the higher profit margin businesses, and create a barrier to entry for their competition. I don't know if that justifies the fabs, because the capital costs have become insane. There are some advantages

  • I don't get it. (Score:4, Interesting)

    by ErichTheRed ( 39327 ) on Friday February 07, 2014 @11:40AM (#46186977)

    How is semiconductors not a core business for a company that still makes huge profits off mainframes and midranges?? Sure, keep design in house, but you'll lose the flexibility you have. Imagine your research division came up with an amazing new chip design they wanted to work on right away, but were told "Nope, it'll take 6 months to ramp up GlobalFoundries, TSMC, or whatever. Sorry."

    The thing I really don't get (in general) is the way businesses feel like they can have no assets on their books and just run everything with a massive tower of multi-layer outsourcing. It doesn't make sense -- outsourcing something is never cheaper than doing it yourself. As soon as you do that ,you add in a layer of middlemen who need to get paid for doing a task which was previously cheap or "free with purchase of inhouse labor." It never works out. I guess I'll never be an MBA, because I don't get the accounting tricks that make a company appear profitable when they're wasting money on things they could do cheaper and better themselves.

    For IBM's case, I do see what they're trying to do. Software is more profitable than hardware. But the problem is that IBM is/was a huge innovator in hardware and chips. They're one of the last US companies massive enough to support basic research that can improve those hardware innovations. IBM's software may be profitable, but I haven't seen anyone singing the praises of WebSphere or their Rational products lately. IBM also has a massive "services" division. I've had extremely good luck with the services people who service IBM hardware, but that's going away. So, we're left with the legendary crap outsourcing and offshoring stuff they do for large companies, and of course, "consulting." My experience with outsourced IT run by IBM is an ITIL nightmare of endless support tickets, revolving door engineers, meetings to plan meetings to plan the strategy for changes, etc.

    It's kind of a shame if you ask me. I am just old enough to remember when IBM was as powerful as Microsoft was and as Apple is right now. They were able to command huge margins on everything they sold because it was backed up by a really good services team. People I know who worked for IBM "back in the day" tell me the corporate culture was weird, but employees never wanted for anything because they made so much money. (I also know people who worked for Sun and Digital who say the same thing.) In some ways, it would have been much nicer to work in the computer field during this "golden age of computing." I guess my main question is where the new hardware innovations will come from when you don't have a massive company and research group driving them.

    • I guess my main question is where the new hardware innovations will come from when you don't have a massive company and research group driving them.

      Did you ever consider that basic research is hard to justify in a cooperate environment? Hence, better left to public entities, as done in many countries.

      I think that big companies splitting up is a good thing, they'll be able to focus their research and be much more agile.. Other companies,start-up, etc. will also be able to compete better if they can purchase services from independent chip manufacturers. There will be less dirty game where chip manufacturers say they won't produce your chip because they

    • It doesn't make sense -- outsourcing something is never cheaper than doing it yourself.

      That's not the case for IBM hardware, but there are plenty of benefits that come with scale that you may not be able to get if you do the task yourself.

    • How is semiconductors not a core business for a company that still makes huge profits off mainframes and midranges?

      Probably because the biggest part of the value added by them is in the design, not the manufacturing. IBM does not appear to have any competitive advantage in semiconductor manufacturing plus their core business now is in services. Their mainframe business really is to some extent really just a hook for their services. It remains significantly profitable but some of the components in those mainframes have become commodities [wikipedia.org] which means low margins.

      Sure, keep design in house, but you'll lose the flexibility you have. Imagine your research division came up with an amazing new chip design they wanted to work on right away, but were told "Nope, it'll take 6 months to ramp up GlobalFoundries, TSMC, or whatever.

      Why do you presume IBM could ramp up any faster? Just be

    • Re: (Score:2)

      by Nelson ( 1275 )

      How is semiconductors not a core business for a company that still makes huge profits off mainframes and midranges?? Sure, keep design in house, but you'll lose the flexibility you have. Imagine your research division came up with an amazing new chip design they wanted to work on right away, but were told "Nope, it'll take 6 months to ramp up GlobalFoundries, TSMC, or whatever. Sorry."

      Actually, if they can partner with a fabrication company and get the quality they need it will increase their margins. Fabs are expensive and just not worth it until you have massive volumes. Old IBM would buy up a stake (or more likely, keep a stake) their partner and it'll almost certainly be whomever buys their current fabrication ability.

      Look at Apple, they don't have a fab... It's odd to me that this issue strikes such a cord, IBM has a checkered history at best in this department. More importa

  • Big Blue wants to sell off its manufacturing operations, but will continue to design its own chips.

    As "will continue to design its own chips" is not a complete sentence, the comma before "but" is not appropriate.

  • Next IBM press release... (Score:4, Funny)

    by chiller2 ( 35804 ) on Friday February 07, 2014 @12:12PM (#46187309) Homepage

    01 Apr 2014: IBM (NYSE:IBM) International Business Machines Corporation (IBM) has changed back to it's original name, Computing-Tabulating-Recording Company (CTR) and will be selling off all post 1930 technology units to focus on it's core business of dial recorders, electric tabulating machines and time clocks.

  • US companies are selling off hardware because they discovered that bullshit (AKA "consulting") is America's comparative advantage [wikipedia.org].

  • Is this the homeopathic theory of business? (Score:3, Funny)

    by khelms ( 772692 ) on Friday February 07, 2014 @01:16PM (#46187975)
    Sell all your product lines in order to raise profits to the maximum?
  • DEC used to make everything they sold: the chips, drives, displays, circuit boards, software, you name it. Eventually, for the sake of raising profits, they sold it all off part by part. Then they were absorbed by Compaq, which in turn was absorbed by HP. Today they're nothing but a memory. So who will ultimately buy IBM and when will they do it? It's now just a matter of time...

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