The 6 Degrees of IBM

IBM (NYSE: IBM  ) is betting that businesses have a need for speed.

On Monday, Big Blue introduced Power6, a new server chip that doubles the processing power of its predecessor. Power6 leaves many of its peers in the dust, including Intel's (Nasdaq: INTC  ) Itanium.

By the numbers, it's not even a close race. Power6, based on the same PowerPC platform that once powered Apple's (Nasdaq: AAPL  ) signature Macintosh computers, tops out at 4.7 gigahertz. Itanium, meanwhile, hits the wall at 1.66 GHz.

Most other server chips, such as the highly successful Opteron from Advanced Micro Devices (NYSE: AMD  ) , process information between 1.0 GHz and 3.0 GHz. In that sense, Power6 is a significant victory.

But the story gets better. Power6 also has what IBM is calling "configurable bandwidth." Put in the simplest terms, the chip can be tuned to either (a) feed bits and bytes through a server at unprecedented speed, or (b) feed just enough data to get the job done and keep the server cool.

I count this as almost as important as the speed gains made in Power6. Why? Data center electricity bills doubled from 2000 to 2005, according to an AMD-sponsored study performed by a staff scientist at Lawrence Berkeley National Laboratory.

Huge power bills have created a cry for efficiency from technology managers charged with squeezing more from the data centers they oversee. Power6 could placate those users and, according to company estimates, save them $100,000 per year in electricity.

If true, efficient Power6-based machines, due to become available next month, could give IBM the edge it needs to eke out gains in a slowing server market. Researcher IDC projects that the overall server market grew just 1.9% in the first quarter.

With more media and business services coming online daily, Corporate America has never had a greater need for speed. But there's a limit to what we'll pay to ride. With Power6's happy medium, IBM seems to have found its way to the market's pole position.

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Fool contributor Tim Beyers, ranked 6,330 out of more than 29,000 rated players in Motley Fool CAPS, is a sucker for growth stocks and a regular contributor to Rule Breakers. Tim owned shares of IBM at the time of publication. Tim's portfolio holdings can be found at his Fool profile. His thoughts on growth stocks, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy is a chip off the old silicon.


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