IBM Could Be An Interesting Partner
IBM is a logical choice to buy AMD. For starters, AMD cannot be bought by just anybody, since there are limiting factors with the license for the x86 architecture. If AMD would be acquired by a foreign company (such as Samsung), that license would be lost, and that would diminish the value of AMD as a company. Thus, Nvidia and IBM, are the only two real players are in the game.
When it comes to IBM, the matter of market cap is very simple - AMD is currently valued at $3.88 billion and Nvidia goes for $13.44 billion. IBM is valued just below the $150 billion mark. Thus, AMD is pocket money for IBM, and the potential gains with AMD under IBM's wings are numerous.
For starters, IBM has a ton of manufacturing partnerships and is a member of a manufacturing alliance that involves AMD, IBM and Chartered from one side, and Toshiba and Sony from other. Let's not forget the fact that with AMD/ATI (or just Daamit) on-board, IBM would rule the world of video game consoles - all three consoles feature IBM processors, and the two leading consoles have ATI GPUs inside. The next generation of consoles could look much different, if IBM would have such design teams to develop complete solutions for Microsoft, Sony and Nintendo. And the market of 200-300 million consoles is very attractive.
There is also a small fact that AMD relocated one engineering team from Austin, TX to East Fishkill, NY - to work on a new manufacturing processes on the spot. With a lot of AMD engineers working closely side-by-side with IBM on next-gen designs, opening all secrets would create an incredibly flexible semiconductor giant that would be able to seriously cut down Intel's market share.
This would also propel IBM into worlds that are currently closed for the company, such as the consumer electronics segment, where ATI Imageon chips go head-to-head against STMicro, Thomson, Philips, Silicon Optix and others. The handheld market is also an interesting segment where ATI and Nvidia ship hundreds of millions of chips per annum, and we won't go into lucrative HPC deals where IBM usually competes either with its Power, Cell or Intel chips. Going all-IBM in the x86 arena would also open a new world for IBM's services, and this is what the company wants to influence. With ATI on board, IBM would enter the world of visual computing, which is set to dominate the world in decades to come (holographs, HUDs, monitors everywhere we go).
GPGPU also comes to mind, and this is the reason why both IBM and Nvidia would want AMD very, very badly. AMD has been quite vocal about integrating GPGPU-friendly improvements, and GPUs would gain CPU-friendly features.What speaks against an acquisition of AMD by IBM is IBM's current direction into services.
With Nvidia not having any support from partners to buy AMD, and the fact that the debt-to-equity ratio could prove deadly, Nvidia is effectively out of the running for the company. A deal could still happen, but if AMD is for sale, IBM is the logical choice.
As some Intel insiders have told us, this would be the move that scares Intel's leadership beyond belief. There is a saying inside Intel: "IBM is a vampire that never dies". You can give it Tom Cruise's face, but the fact of the matter is that IBM has been around the block before the block even existed.
A combination of IBM and AMD would leave x86 licenses safe and intact, and that is a matter of utmost importance. From another side, the manufacturing alliance should not be overlooked.
A third option for AMD is to weather the storm and stay on course alone, surrounded by a ton of partners, and faith that K10.5 and K11 will bring out competitive CPU parts, to complement graphics and chipsets. Only time will tell how this story ultimately unfolds.
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Here's a curveball. Why doesn't Comcast move into the chip world? Comcast just threw a bunch of money at Clearwire for WiMax deployment, which is to provide one more avenue of pushing content. What if they controlled content, distribution and the end user's equipment via low-cost HTPCs, much like they control the cable box (for the most part, considering the failures of CableCard). This would be a scary situation for MS, Sony and particularly Nintendo (and likely the consumer :p). Bundle Gaming (via HTPC), VoIP over WiMax and cable/fiber, DTV and HS Internet. Vertical integration is the name of the game, not horizontal aquisition, i.e. IBM.Reply
Interesting article. One thing you didn't mention about an acquisition by NVidia are the significant regulatory hurdles to overcome, i.e., antitrust. Such a merger would create a pretty big monopoly in the add-in graphics market.Reply