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Could chip flaws boost IBM’s standing?

Could chip flaws boost IBM’s standing?

At least one analyst thinks the Spectre and Meltdown flaws could see IBM pick up new market share

The recently disclosed Spectre and Meltdown processor security flaws could allow IBM to gain share in the mid-range and high-end server market, Barclays analyst, Mark Moskowitz, has argued.

Last month, IBM launched its Power9 processors, designed for cloud computing and machine learning, to better compete with the likes of Intel and Advanced Micro Devices (AMD).

A fix for Meltdown, which only affects Intel chips, could lower performance by 30 per cent in some cases, pushing customers to look for new processors, potentially lifting both IBM's market share and revenue, Moskowitz wrote in a note titled "IBM - A New Dawn Emerges".

In a blog post dated 15 January, IBM said firmware patches for its Power9 platforms were available to fix the security flaws.

The analyst’s prediction comes as shares in IBM rose nearly two per cent on 17 January, helped by a double-notch upgrade for the company from Barclays ahead of fourth-quarter results on Thursday.

Barclays cited a handful of reasons for moving the stock to "overweight" from "underweight", saying the company could emerge as the next important cloud vendor after Amazon and Microsoft.

Out of 24 brokerages covering the stock, eight now have a "buy" or a higher rating; 14 have "hold" and just two "sell."

Shares of IBM gained 1.7 per cent at US$166.72 in premarket trading. Up to Tuesday's close, they have gained nearly 12 per cent since its last quarterly results on 17 October.

To counter a slowdown in its legacy hardware and software businesses, IBM has been shifting focus steadily towards data analytics and cloud computing services.

The cloud market is currently dominated by Amazon Web Services (AWS) and Microsoft's Azure unit -- both of which have been growing in double digits as customers scale up their internet presence.

"There is room for another cloud player," Barclays analyst Mark Moskowitz wrote in his note, and raised his price target on the stock to US$192 from US$133.

The company, which will report after US markets close on 18 January, trumped Wall Street's estimates for both profit and revenue in the third quarter ended 10 September.

While total revenue in that quarter fell 0.4 per cent, the 22nd straight quarterly fall, it was also the smallest quarterly drop since the third quarter of 2016.

Moskowitz said IBM's revenue may prove stable or even grow over the next 12-18 months.

(Reporting by Supantha Mukherjee in Bengaluru)


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