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IBM, HP squabble over Intel servers

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ZDNet's Stephen Shankland has dug up the Battle of the Marketing Collateral between IBM and HP over their respective Intel multiprocessor Xeon servers offerings.

The venerable computer firms are dissing each other big time, which is exactly what one would expect in this bright new server world of industry standard building blocks.

Functionality is the same more or less; the software is the same, more or less; and customers can compare apples with apples. Result: arguments get nit-picking down and dirty really quickly, just like in the desktop processor world.

As more of the server world swings Intel's way, there will be many more examples of OEM handbags at dawn.
At least there will be Intel co-op money to fund all the intra-nicine IA-32 disputes.

Oh for the good old days of vertical integration, when the real enemy was the system company's resellers, attempting to undercut the inhouse sales force on price and steal away their commission.

Sun may look a little vulnerable to the Intel enterprise server assault, from below with Xeon MP and sideways, maybe above with Itaniums 1 and 2. But at least it owns its server technology and CPU platform - "The answer's SPARC, now what's the question". And it has applications support and customers by the bucketload. Fighting over Intel scraps ain't its style.

And neither is it IBM's. The company continues to develop and promote its Power4 server CPU platform. Former CEO Lou Gerstner reckoned that ownership of the chip technology gave IBM an edge. He's right, of course. But it doesn't come cheap.

IBM continues to invest very heavily in chip technology, spending $2.5bn to refit its Fishkill, NY fab. It wants to turn into a contract foundry. Who knows, it might even succeed.

The company has some old, under-utilised plant, which critics say should be binned or sold-off. It doesn't appear to be in a hurry to do this, although yesterday
Big Blue cut its chip workforce by 1,500.

Microelectronics accounts for just 5 per cent of IBM's turnover, but soaks up huge capital costs. And a downturn in sales - high fixed costs, low marginal costs - has a disproportionately high knock-on effect on profits.

All this suggests that Intel's macroprocessing/ economies-of-scale argument will win the day. But the jury's still out. There are plenty of cost-sharing partnerships for IBM and Sun to pursue. And their customers are not in any hurry to jump ship. ®

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