An AMD/IBM merger would not be good for system builders

The Financial Times of London published a story yesterday citing sources that AMD and IBM would either merge or broaden its partnership.

A merger or take over of this magnitude would not be welcomed news and pose many challenges for the system builder community especially in this country.

For one, under IBM’s stewardship they may not be open to selling processors to system builders. They may want to keep it in house and advance it for better market opportunities than the system builder channel.

The system builder channel would be a relatively new channel for big blue. The acquisition cost could go up. IBM would have to pay for this billion dollar acquisition some way and to increase the price of the processors across the board would be an obvious move. System builders would not have the cache or the size to negotiate with an IBM.

Intel, which has steadily increased its focus on this community, would inevitably make gains with system builders and could reestablish its dominance. That too could become troublesome for system builders because instead of two rivals fighting it out you have one who will inevitably dictate to the market.

I can see why AMD might want to be acquired by IBM. They have had a horrible year and their much-hyped Barcelona chip failed to deliver on its promise. If AMD was part of IBM’s Microelectronics division they could expand and build desperately needed new chip plants.

And, to be fair IBM could help system builders as it would be a new business opportunity for them.

But, I don’t see it because system builders are small fry in this market.

It would be sad to see because this community makes its living building customized systems on the basis of fast processor speeds for local businesses. Any change in direction could mean a slow down in chip supply and increased acquisition costs.

Another thing to consider is that local businesses enjoy dealing with system builders because they get customized systems for their needs at an affordable price. White box was never meant to compete with Dell or other lower cost brand names. Without an independent AMD in the market keeping Intel in check the system builders may be rendered virtually irrelevant.

What do you think about this? Are you a system builder getting squeezed? I would like to know your story. Email me

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