/ciol/media/agency_attachments/c0E28gS06GM3VmrXNw5G.png)
Follow UsNicole Volpe
NEW YORK: International Business Machines Corp. on Monday unveiled new
networking chips, including a processor that allows for less expensive
customization by using software rather than design changes.
Cisco Systems Inc., the top maker of computer-networking equipment, is
developing the new IBM network processor for an advanced networking system, IBM
said, declining to give further details about the system. The Cisco deal was the
latest in IBM's efforts to win over top-tier networking customers amid market
turmoil that has given a rough ride to many of its upstart and even established
competitors in the communications sector.
Indeed, Armonk, NY-based IBM beat out Intel Corp., the world's biggest
chipmaker, on the project with Cisco, an industry source said. "This was an
excellent win on IBM's part," said Frank Dzubeck, analyst with
Communications Network Architects. "It establishes for them a stronger base
within Cisco."
Financial details of the deal were not disclosed, and Intel was not
immediately available for comment. IBM's focus on advanced custom chips has
allowed it to sidestep the worst of the downturn in demand for communications
gear - and the world's largest computer maker is currently investing $5 billion
to build out its chipmaking capacity.
"We're succeeding in the demanding networking industry because our
uniquely diverse and robust product portfolio is suited for a wide range of
established and emerging customers," said Christine King, vice president of
semiconductor products for IBM.
Other companies in the communications chipmaker sector include Broadcom
Corp., Applied Micro Circuits Corp. and Intel. Many of these companies have seen
sales dry up amid an economic slowdown and a buildup in inventory. IBM and Intel
are vying for the top position in supplying high end network processors, Dzubeck
said, adding that market researchers predict the sales of the chips could go as
high as $4 billion to $6 billion per year by 2004.
"But don't expect this to be a two-horse race," he said. "You
can find that with a Broadcom there could be with a few acquisitions they take a
great leap forward." IBM said sales of its networking chips, housed in its
microelectronics group, tripled in the first quarter. "We've focused on the
leading edge chips," IBM Technology Group Executive John Kelly said in a
telephone interview. "We're not immune to a downturn, but a lot of the
falloff has been in older products.
"We've seen a tremendous pull from customers who need more performance,
who are looking for that next generation chipset," he said. chief financial
officer John Joyce said earlier this month that that the overall
microelectronics group would show double-digit sales growth over the next year,
factoring in the glut in inventory being felt by its customers, such as Cisco.
"We have looked at our customer set in microelectronics going forward,
and we have anticipated what we think those customers would be purchasing from
us," he said. "That is why I give the double-digit revenue growth
going forward which is what we would expect out of microelectronics out through
the rest of the year."
He added that once IBM wins a customer on the strength of a chip design, it
was likely to hold onto that customer. "Once you win that design win going
forward, the chances of a change are small," said Joyce.
On Monday, IBM unveiled the network processor, which is designed to allow
customers to easily tailor the chip for specific systems or performance
requirements. This allows a customer to help network administrators deliver new
services, such as moving audio or video downloads across the network.
IBM also introduced a testbox for customers to work with to determine how the
processor will perform within their systems. And it debuted a few new family of
cores - the building blocks that connect together to create a system on a chip -
which includes things such as processor, memory and wireless networking systems.
(C) Reuters Limited 2001.