IBM about to abandon production of its Power7 chips?
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Jan. 23, 2012
Power Systems, the IBM division that takes care of Power 7 processors for Big Blue is cutting down prices on its CPU
cards.
So is IBM about to abandon the production of its Power 7 chips anytime soon? Read on...
To be sure, IBM has dozens of different SKUs for processor options across its many servers, and the price cuts which
range from 20 to 30 percent off the prior list prices only apply to six different cards used in three of the Power Systems
7 lineup.
Giant IT suppliers and vendors such as IBM rarely explain why they cut a price on a specific product or service, and
IBM has some specific processor cards rapidly building up in its inventory and it wants to get rid of them to a more
manageable level, at least this is what would make sense from a business perspective.
This is how IBM sells Power-based servers-- you pay for a card with a specific processor that has a base price and
then you pay to activate each core on that processor. IBM's Power 7 processors come in speeds ranging from 3 GHz to 4.1
GHz and with 4, 6, or 8 cores activated, depending on your exact needs.
Specifically, on the entry-level Power 710 server, one card based on the eight-core Power 7 chip running at 3.55 GHz
got a 30 percent price cut on both the base card and the core activations. The card now costs $1,750 and each core costs
$1,152 to turn on.
Now that's a lot more expensive than a simple Xeon or Opteron processor, but then again, that is one more way that IBM
earns its billions in revenue each year.
On the Power 740 rack server, which has a lot more RAM memory and IO expansion, a processor card with the same eight-core
3.55 GHz CPU card now costs $3,339 after a 20 percent price cut, and each core activation got the same price discount and
now costs $2,212. Still a lot or money when compared to a Xeon CPU.
And four processor cards used in the midrange Power 750 server and their core activations also got a 30 percent price
drop as well. An eight-core 3.6 GHz Power 7 processor card now costs $12,390 and core activations cost no less than $6,300,
even after the price cuts.
A card with one six-core 3.7 GHz processor now costs $4,900 and core activations cost $3,395, while a card with four
cores that can run at 3.7 GHz costs $3,017 and core activations cost $3,250.
At the end of the list, an eight-core Power 7 CPU card costs $4,158 and activating a core costs $2,170.
However, IBM didn't make an official price cut across its whole Power 7 product line, but as with all server vendors,
the list price is a ceiling from which to start negotiating, not a street price!
Many IBM Power Systems vendors claim that they get much better discounts than this price cut anyway, but is it true?
The important element to remember here is that the price cuts don't apply to all Power 7-based servers, but that
doesn't mean you can't ask for the same price cut to start and then negotiate your way down from there.
Even at these relatively high prices, which all RISC and Itanium server makers charge-- and that includes HP and Dell as
well, the price they pay for the processors makes up a small portion of the overall cost of the system.
At this point in the history of the enterprise server business, memory, disk, and systems software make up a much
larger portion of the server budget than processors anyway.
So is IBM getting rid of its Power 7 CPU business? Not anytime soon-- it's simply making too much money with the
division. All it's trying to do right now is get rid of some excess inventory on some chips.
Source: IBM.
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