Intel Loses Xbox Contract to IBM
"The Xbox, though it's millions of units, isn't that much profit for Intel," says Gartner analyst Martin Reynolds. "It's a parking place for lower-cost processors -- somewhere they can put things that one could argue otherwise wouldn't have sold."
For its next Xbox release, Microsoft (Nasdaq: MSFT) has chosen to jettison the game console's Intel (Nasdaq: INTC) chip in favor of a processor built by IBM (NYSE: IBM) . Industry observers see the change -- which no one had predicted -- as a major win for IBM and a set-back for Intel, whose high-performance chips power many gaming applications.
It is also an unusual turn of events for the longstanding partnership between Intel and Microsoft. The companies' technologies have worked together so seamlessly to dominate personal computing that the term "Wintel" is used to describe the pairing.
The underlying technical reason for the switch is not yet clear, Aberdeen analyst Russ Craig told NewsFactor. But technical considerations aside, "IBM may very well have been price aggressive. Their semiconductor operation had been losing money, and this may be part of a game plan to get the utilization rates up."
Intel, on the other hand, "is coining money like a mint, so they have no need to come down on price," he said.
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