IBM Makes a Power Play -- A new strategy in a mature market

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IBM Makes a Power Play'

IBM (NYSE: IBM - news) has established a new global organization to push the company's Power processor platform, with an emphasis on establishing a foothold in the potentially lucrative Chinese I.T. market.

Power.org comprises 15 companies that will focus on chips and systems based on Big Blue's Power Architecture technology. They include Cadence Design Systems, Chartered Semiconductor Manufacturing, Culturecom, Novell (Nasdaq: NOVL - news), Red Hat (Nasdaq: RHAT - news) and Sony (NYSE: SNE - news) -- along with a selection of Chinese chip makers.

Collaboration is Key

Power chips are earmarked for products ranging from video game systems and telematics to supercomputers. Power.org's efforts are aimed primarily at speeding the development and introduction of such hardware by combining the technological expertise of the partners.

"This is IBM's next logical step in opening up the Power architecture," Illuminata analyst Gordan Haff told NewsFactor. "Letting developers and partners see the architectural steps is one thing, but to really follow the open source software model, you have to set up an organization and governance model to allow collaborative development."

Open Standards Critical

Mike McGinnis, IBM's program director for PowerPC licensing, told NewsFactor that open standards are critical to the Power strategy because customers want to refocus investment on the differentiators of their products.

"Proprietary standards for electronics and systems can be expensive for the manufacturers," he said. "They limit the community of innovation suppliers, reusability of features across broad product applications, and the ability to create and maintain differentiating features."

Among the applications being examined by Power.org for the new chips are code blocks to speed 3D video, MPEG decoders, and decoding of MP3 digital music files.

"Community innovation could address these types of features and allow for sharing and reuse across companies designing with Power technologies," McGinnis said.

Many Applications

Haff pointed out that Power technology has a broad array of applications, such as the high-performance POWER5 chip and the PowerPC chip found in low-end servers like IBM blades, and the Apple (Nasdaq: AAPL - news) Xserve and Mac computers, as well as game consoles.

"IBM has had success in working with partners who can adapt the core Power technology to their particular needs. For these types of applications, you need solid basic technology, but how you work with OEM partners is just as important," said Haff.

Eyeing China

To that end, IBM is emphasizing greater cooperation with vendors in China. Shanghai Belling, the country's largest semiconductor company, will license Power technology, while Culturecom has introduced a kiosk-like tax organizer system now being tested in several Chinese villages.

Sony's inclusion in Power.org is logical given that the Japanese electronics giant helped develop the next-generation Power-based Cell chip, with IBM and Toshiba designed for digital media applications, including the forthcoming PlayStation 3, as well as high-definition TVs.

Products based on Cell are expected to begin appearing on shelves early next year.