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Tuesday, November 04, 2003
IBM to power next Xbox

IBM and Microsoft announced a technology sharing agreement that one analyst said could result in IBM providing the processor silicon for Microsoft's next-generation game platform, displacing Intel from the Xbox 2.

Microsoft said that it has licensed processor technology from IBM for "for future Xbox products and services to be announced at a later date." Bernie Meyerson, chief technologist at IBM's microelectronics division, said he expects new Xbox technologies to be based on the latest in IBM's family of state-of-the-art processors.

Rick Doherty, principal analyst at the Envisioneering Group, said the deal has major implications for both IBM and Intel. IBM has been a long-time supplier of silicon to Nintendo, and is developing the "Cell" processor — a reconfigurable and distributed architecture &3151; with Sony for the Playstation 3 console. With Microsoft added to its customer list, IBM "by the middle of this decade could be supplying the processors to all three of the major game machine suppliers," Doherty said.

IBM is likely to modify its most advanced "G5" PowerPC silicon, which is being used in Apple Computer's fastest Macintosh desktops, for the embedded market, reducing the cache and cutting power consumption, Doherty said.

Intel won the original Xbox processor business, beating out AMD in a last-minute negotiation. The decision probably means Intel makes little profit on its Xbox silicon. Microsoft Chairman Bill Gates may announce the Xbox 2 system at the International Consumer Electronics Show in Las Vegas in January. That system may ship as early as Christmas 2004, or more likely in 2005, Doherty said.

The current Xbox is based on a Pentium 3 processor running at 800 MHz or less. One problem Microsoft has faced is the conversion of Xbox systems into personal computers. By buying a heavily subsidized $200 game machine from Microsoft, and then adding a pirated disk drive, the Xbox can be used as a "poor man's PC, turning a $200 game machine into a $600 personal computer, which Microsoft doesn't like at all," Doherty said.

That may have led Microsoft to the PowerPC platform developed by IBM.

Also, Microsoft has been bothered by the relative ease with which hackers have copied games that run on Xbox consoles. By buying one game disk and copying it with rewritable DVD disks, Microsoft is losing millions of dollars in game system revenues, analysts said.

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