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IBM Spends $2.4 Billion On New Power Servers And Partners With Google And Nvidia To Go After Intel

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After watching its hardware revenues shrink quarter after quarter and announcing a plan to sell its $2.3 billion x86 server business to Lenovo in Jan., IBM's announced a major shift in its servers business behind new Power Systems servers that the company says will be 50 times faster than the ones it's divesting--while also anchoring a new collaborative data center foundation that includes tech powerhouses Google and Nvidia .

The Power systems servers are built using a Power8 processor IBM says has led to some analytics requests that have run more than 1,000 faster than on IBM's previously available servers. The new solutions cost IBM $2.4 billion over the last three years, the company said at an industry event Wednesday. Perhaps most significantly, the servers don't run on Intel motherboards but are open-sourced "white box servers," which the company says will make it easier to handle data from a range of databases and data software like NoSQL and Hadoop.

The news coincides with the announcement that IBM is joining Google, Nvidia, Mellanox Technologies and Tyan as founding members of the OpenPOWER Foundation, which will build off those systems to improve data center infrastructure across the tech community.

"There's a big shift in data, and more and more we are heading to an open, collaborative world," IBM Power Systems chief Doug Balog told Forbes. "When I took over the unit in July of last year, there was a strong belief that we could do things a lot by ourselves. But the reality is that open collaboration is where new ideas are being developed."

The Power systems unit has overseen plenty of change as Balog took charge last year as the unit has continued to weaken in financial performance. Revenues for the unit were down 22 percent in Q1 year-to-year in a rough quarter overall, and total systems revenue was down 24%. CFO Martin Schroeter had said on the company's earnings call last week that the shift to focus on an OpenPOWER ecosystem would require repositioning the Power group and "right-sizing" it through some layoffs.

IBM's hoping the POWER8 processors will turn around some of its sales losses within that lagging systems group given the new speed and easy data access the company says the processors, which have 4 billion transistors and 11 miles of copper wiring per square inch unit, can bring servers using them. Those servers use Linux and will be integrated with the data center cloud infrastructure the company's building around its SoftLayer acquisition, a multi-billion dollar investment by IBM. Pricing of the S-Class severs, which will be available to purchase starting in June, will cost about $8,000 per server at their most basic.

As a rough benchmark, the $2.4 billion cost of the new Power servers over three years would represent about 13% of IBM's overall annual research and development spend.

IBM's new Watson Group, another billion-dollar initiative to turn Big Blue around, also runs on Linux and Power, Balog says. The company's also integrating its new BlueMix middleware capabilities onto Power.

The new Power servers are a seeming challenge to Intel-based servers like the very ones IBM has agreed to sell to Lenovo, but Balog says the units were separate at IBM and autonomous to each other. IBM says the decision to divest the x86 server group "didn't factor" into Wednesday's dual announcements.

Nvidia announced at the industry event Wednesday some early performance improvements the company's graphics processing units have seen on the new servers and will make more presentations next week at IBM's Impact conference in Las Vegas. Google didn't make a specific announcement, but will presumably look to build on the open servers.

OpenPOWER came together last August and was formally formed in September, but this is the first time the foundation has unveiled new systems built for the initiative's purpose.

"It's our intent to see the IBM Power business recover," says Balog. "We think it can with the refocus in the market place toward open collaboration, so this is an exciting time for our team."

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