Prince Charming or Hannibal Lecter?

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Is The Prince That Charming?

IBM has been getting increasingly involved with AMD lately, which put that comment by an IBM exec some months back about AMD not being around five years from now in a whole different light, now doesn’t it?

Maybe.

Some AMDers are starting to sound like Snow White singing “Someday My Prince Will Come,” uttering thoughts ranging from highly wishful thinking to pure fantasy.

Reality paints a different picture.

IBM has to build fabs for its equipment. It likes to keep its expensive fab equipment busy. If AMD wants IBM to make CPUs for it and pay them for it, that’s fine by IBM.

They’ve done that before and are doing it now. IBM was a second-source for Mac CPUs, and now they’ll be making G5s for Apple. On the PC side, they built CPUs for Cyrix.

IBM didn’t buy Cyrix, and they aren’t going to buy Apple, no more so than TSMC is going to buy nVidia, or Intel is going to buy Dell.

You say, “But AMD’s CPU design team moved to IBM headquarters!” This is true. Could that mean IBM may buy AMD eventually? Sure. It could also mean IBM is just out to poach some good design engineers from a company going down the tubes.

The point to this is that IBM can play this association with AMD a lot of different ways, from white knight to bloodsucker.

I’m not saying IBM won’t eventually buy AMD. I’m saying it’s foolish to assume IBM will or has to buy AMD.

Essentially, what’s happening between IBM and AMD right now is that IBM, in a non-committal way, is checking AMD out. If there are skeletons in the Hammer closet, IBM will find out about them.

Even if there isn’t, that’s hardly any guarantee IBM is going to turn into Prince Charming. The main reason for IBM not to become Prince Charming is that there’s an Evil Queen named Intel around, and, man, is she a bwitch.

If IBM is so hot for AMD, then why did they stop making Athlon-based desktops two years ago? Prince Charming didn’t want to get on the Evil Queen’s bad side.

So now this guy is supposed to suddently turn around and tell the Evil Queen, “I’m going to try to chop off your head?”

That’s not a good thing to do while you’re buying all your desktop CPUs from the Evil Queen.

IBM buying AMD will be regarded as a declaration of war by the Evil Queen Intel, and for good reason.

AMD by itself cannot threaten Intel dominance. They don’t have the money for it. They can only be annoying and at most make Intel do a couple things they might otherwise not want to do. IBM is an entirely different matter.

AMD has two kinds of financial problems: one short-term, one long-term. The short-term problem is AMD continually losing money. Hammer has at least a fighting chance to fix that next year.

The long-term problem is that as cutting-edge fab costs get higher and higher, it is less and less likely AMD will be able to pay for them and keep up with Intel. Dresden got built only because the German authorities gave AMD a sweetheart deal to get (relatively few) former East Germans working. It’s hard to see who would front a standalone AMD far more money for future fabs.

Again, IBM could do this. However, IBM has been trying to get away from the commodity computer hardware market simply because it’s not very profitable compared to computer services, and that’s just what AMD does.

So while Snow White may be cute, and can be gotten cheaply, she looks pretty high-maintenance in the long run, and that doesn’t even counts the costs of buying a war with the Evil Queen.

Can you see why Prince Charming might think twice about this relationship, and might be inclined to say, “No thanks?”

The Hannibal Lecter Option

AMD has some valuable assets. It has a good deal of intellectual property, and some smart people working for it. It has a good fab at Dresden.

Provided the price is right, Prince Charming might want to have Snow White over for dinner. Not for the sack, but as a snack. A little brain tissue here, a little fab conversion liver pate there.

No need to be greedy though. Sharing is caring, so maybe a technology licensing blood transfusion to Via to make Snow White really white (and keep the antitrust people happy), too.

This is at least as likely as a beautiful wedding.

To Be Fired, Or Not To Be Fired? There’s one group of people who will certainly lose their jobs should IBM buy AMD: AMD executives. Within a year or so, they’ll be gone.

Some would rather mind this. Some have already thought about this. If Hector Ruiz got canned as a result of this, for instance, he’d get three years salary, a bonus, and acceleration of stock options (some of which might prove quite valuable).

Don’t think that won’t play a role in any decision.

Stop Fantasizing

Many reading this will say, “But IBM can’t do that!” and if you asked the question, “Why not?” the answer will boil down to either “Because I don’t want them to,” or “AMD (really meaning “my side”) is too important to die.”

Sorry, guys, neither of these hold water. If you think the world works based on what you want, you need some serious recalibration. Disney lied to you. Fairy tales don’t necessarily come true.

Per the importance of AMD, I have news for you. The personal computer industry can live without AMD. At worst, Intel might jack up the prices for a couple years (and I have doubts they’ll even be able to do a whole lot of that), but that will just mean Via will take the place of AMD even sooner than they would otherwise.

No number two is essential. It might be to your wishes and desires, but so what?

I’ve outlined some possibilities that certainly would be horrifying to AMDers, and maybe even fatal to AMDroids. This is not to say they’re likely to happen, much less that they have to happen. I’m just saying they could happen.

I just don’t know. In all likelihood, nobody, not even the execs at IBM and/or AMD, knows at this point. The situation will have to play out, and the big decisions will be made then, depending mostly on how they play out.

The point of the story is to point out that this tale of a corporate Prince Charming and Snow White doesn’t have to have a happy ending. Life doesn’t always work out that way.

Ask the people who used to work for Cyrix. They made a manufacturing arrangement with IBM, too. They couldn’t ramp up the speed of their CPU, so they started playing games with an earlier version of PR. It blew up in their faces.

Eventually, they were sold to a big company (not IBM, they showed no interest) that did very little to promote the product, much less pumped them up to fight Intel. Eventually, Via bought the rights.

Does the first half of that story sound vaguely familiar? Just keep that in mind if you find yourself fantasizing about IBM and AMD.

It is always a bad idea to confuse what you hope will happen with what you’ll think will happen. It doesn’t help matters one bit; it just blinds you.

Personally, I would like to see IBM buy AMD and take it to the Evil Queen, but I don’t let my hopes blind me to other, less desirable possibilities. I also realize that IBM doesn’t exist to make me happy, or will spend billions of money just to make me happy unless there’s big, big reasons for it to make them happy.

No matter what IBM does, it’s going to be a difficult, complicated call, with a lot of arguments going either way, and a lot of possible options.

I don’t think they’ll do it, but I could be wrong on that. What I do know for certain is that it won’t be a “Doh” for them, and if you think it is, you’re feeling and fantasizing rather than really thinking.

Ed

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