NEW YORK – On August 6, Google (NASDAQ:GOOG) and other partners announced the formation of a partnership to license IBM’s (NYSE:IBM) server hardware and firmware. The alliance will be called the OpenPower Consortium (OPC) and was formed to crack Intel’s (NASDAQ:INTC) dominance of the server chip market by offering alternatives to Intel’s x86 Architecture. The x86 is also the target of ARM (FTSE:ARM) and Hewlett-Packard (NYSE:HPQ).
It is believed that the OPC will allow datacenter customers, such as Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), Google, and Netflix (NASDAQ:NFLX) to develop their own hardware based on IBM’s chip designs, shifting dominance in the server market from Intel to IBM.
Besides IBM and Google, the consortium includes Mellanox Technologies (NASDAQ: MLNX), Nvidia (NASDAQ:NVDA), and Tyan (TWN:2315). Together they will aim to co-develop server, networking, storage, and GPU acceleration technologies for hyperscale and cloud computing data centers. IBM’s Power hardware and software were previously proprietary and will now become open source to OPC members. In a statement, Steve Mills, senior vice president of IBM Software and Systems, said the consortium aims to use a “collaborative development model” to advance datacenter hardware.
The announcement comes at a time when IBM has seen its revenues in the second quarter decline by 24 percent, though company officials claim they continue to beat other Unix server vendors including HP and Oracle (NYSE:ORCL). By focusing on hyperscale and cloud computing data centers the company hopes that they can build on their data center heritage; as most competitors have a history in the client chip market.
The market for server chips, one of the last chip markets left with any real margin, is crowded. Besides Intel and ARM, competitors include Advance Micro Devices (NYSE:AMD), Calxeda Inc., Marvell Technology (NASDAQ:MRVL) and Samsung (OTN: SSNLF) and the announcement might push other competitors to pursue similar alliances.
According to analyst Nathan Brookwood, previous efforts to license what had once been proprietary technology tend to fail as the licensees do not see a level playing field. This could be especially true as IBM plans to continue marketing their own servers, creating an environment where they will be competing with their licensees. However, analyst Joe Clabby noted that Power is a robust architecture for analytics and the cloud and that right now; it could provide organizations an option other than Intel and AMD’s x86 offerings.
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