IBM Puts AMD Inside

"One of the things you're seeing is the recognition that, yes, Intel may be curing some of the worst breakages that it's had over the last couple years, but that notwithstanding, AMD is here to stay," explains Haff.

"So, if your goal is to really be a broadline supplier, you have to, at some level, offer servers based on processors from both vendors," Haff says.

For IBM, offering AMD chips in its systems could provide a way to increase its server sales.

IBM was the No.1 player in the $51 billion worldwide server market last year, according to industry research firm IDC. However, IBM trails H-P in the fastest growing category of so-called volume servers, which are based on the x86 chips manufactured by Intel and AMD. According to IDC, H-P led the volume server market at the end of the first quarter, followed by Dell.

It's unclear whether the partnership will involve a new line of IBM servers based on the AMD processors, an expansion of its existing server line or something different altogether. Presently, IBM uses AMD chips in some of its two-processor servers, but does not offer AMD in any of its four-processor servers.

Of course, there are extra costs associated with IBM broadening its server line to feature AMD chips. But those costs may be offset by the revenue opportunity that comes from selling AMD-based systems, say analysts.

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