IBM Consolidates Chip, Memory Developers

Evan Ramstad
Associated Press

August 1, 1994

NEW YORK - IBM, making further efforts to eliminate redundant work, will start a new division that will encompass 1,200 employees who develop processors and memory systems.

IBM's chip engineers currently develop for the machine produced by their division, ranging from a PC to a mainframe. But IBM more than a year ago announced a strategy of having machines of all sizes based around the same so- called ''power'' chip design.

The division announced Monday is another step in reshaping IBM to fit that strategy.

The new division, Systems Technology and Architecture division, will be based in Austin, Texas, but employees will remain in their current labs in Austin and three other U.S. cities.

The division will be led by Phil Hester, who now oversees development of the PowerPC microprocessor, a chip that runs workstations and personal computers. IBM designed the chip in conjunction with Motorola Inc. and Apple Computer Inc.

Under the new system, the engineers and their managers will ultimately report to the same senior IBM executive, but will be grouped with each other rather than the divisions that create finished products.

That way, an engineer affiliated with IBM's mid-sized AS-400 computer group who possesses expertise in a special manufacturing technique has more latitude to work with the company's mainframe chip designers.

"A lot of this uses the same tools and processes so there's a lot of synergies we can achieve," said Roger Bolton, an IBM spokesman.

The affected employees in Austin, Rochester, Minn., and Endicott and Poughkeepsie, N.Y., were notified by memo Monday.

"This new organization will help IBM achieve several of our strategic imperatives," senior vice president John M. Thompson said in the memo.

Analysts said the new division would likely save IBM money.

"It's main purpose is to eliminate redundancies and duplications in development efforts," said Bob Djurdjevic, president of Annex Research Inc. in Phoenix. ''Presumably out of this, there will be some cost savings.''

Sam Albert, a former IBM executive who runs a consulting firm in Scarsdale, N.Y., noted Thompson recently pulled together IBM's operating software development in a similar manner.

"It's another economy of scale move," he said.

The new division is part of a broader realignment during the past year of IBM's products into two groups: "servers" and "clients."

In industry jargon, servers are centralized machines, typically storing or processing large amounts of data. They interact with clients like the PC on a desk, which have become powerful enough to do many of the tasks room-sized computers did a decade ago.