Fortune Magazine
Fast Forward
IBM's Quasar: Is it the future of computing?
The computer giant is betting a new chip and a reorganized corporate structure will make IBM exciting again.
By David Kirkpatrick, FORTUNE senior editor

NEW YORK (FORTUNE) - Attempting to improve its score in the stock market, IBM is shaking up its business structure and using a revolutionary new chip to bring the high-graphic edge of gaming technology to business computing.

The company's recent announcement that it has developed commercial server "blades" based on its so-called Cell Broadband Engine chip only hints at the changes that are to come at the company. IBM (Research) is about to announce a new corporate structure for its systems division, based largely around a revamped and rejuvenated microelectronics division.

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Last September I wrote in Fortune an article entitled The 9-in-1 Wonder Chip about Cell, an extraordinarily complex chip that combines nine separate processors on a single piece of silicon. I said then that the new chip, which is especially good for displaying graphics and video and was originally developed by IBM with Sony (Research) and Toshiba for game machines and consumer electronics applications, could become a foundation for IBM's future systems.

Well, now it's happening.

Though the work for Sony on the much-hyped PlayStation 3 is mostly done, IBM's engineering group has not at all slowed its own work on Cell and related technologies, company insiders say. Meanwhile, Toshiba plans to soon begin putting Cell chips inside high-definition TV sets.

A critical IBM initiative based on Cell called Quasar (which last summer was merely an R&D effort) has "evolved into IBM's systems strategy -- period." That's what a well-informed IBM executive told me this week. Quasar is IBM's main project for next-generation computing. In other words, IBM believes Cell and related technologies will become part of every computer it builds within just a few years. The just-announced blades are the first commercial evidence of Quasar.

Says Peter Hofstee, one of the chip's chief designers at IBM: "Cell started out as something very specific -- a game chip." But now he says IBM wants to put them to use for things like speech recognition, and take the technology into everyday servers. "That's a much broader play than we originally anticipated," he says.

IBM may or may not be right about this. In any case, among other computer industry players only Microsoft (Research) is talking in terms that even remotely resemble IBM's.

Computers based on Cell can render into visual form massive amounts of data in real time. IBM believes that in the future, computer interfaces will be highly visual, perhaps giving users the feeling that they are "inside" the data. For example, a doctor might swoop through a heart on screen with tremendous clarity and accuracy, making new kinds of operations possible. Cell could also be used in battlefield visualization systems for soldiers and to help geologists locate underground oil.

Last summer, I spoke with Bijan Divari, who heads the Quasar project. "Five to 10 years from now," he told me, "practically all transactions will be image-based, not text-based. Text is the most painful way of doing transactions." Divari compares Quasar to the legendary development project inside IBM which led to the System 360 mainframe -- and set the stage for the company to completely dominate several decades of mainframe computing.

To accompany this revolution in technology, IBM is shaking up the company's structure. On March 13, according to the same IBM executives, the company will announce the creation of a new Technology Collaboration Solutions group, headed by Adalio Sanchez, a favorite of CEO Sam Palmisano.

The IBM Microelectronics chip-making business is the centerpiece of the new group. Until recently a problem child within IBM, the chip business has now been profitable for three quarters, say executives, and grew 48 percent last year.

Besides IBM Microelectronics, the TCS group will include the Quasar project and all the work the company does to build custom systems for outside businesses. This latter activity wasn't even part of IBM as recently as four years ago, but it is now a fast-growing -- 40 percent last year -- and profitable business.

For example, IBM will soon announce it has jointly developed a new digital medical device with the Mayo Clinic to simplify the very uncomfortable process of getting a lung biopsy. Palmisano wants collaboration with customers -- much of it based on IBM's chip-making expertise -- to become a hallmark of IBM.

With his stock still roughly where it was in late 2002, Palmisano has little choice but to shake things up. Cell, Quasar, and the new structure are all part of an ongoing effort to make IBM exciting again -- for both customers and investors.

Fast Forward is a weekly column by FORTUNE's David Kirkpatrick. E-mail feedback to Top of page

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