The focus of the negotiations is Compaq's Alpha computer line, sources familiar with the talks said today. This was first reported in Computer Reseller News.
The talks could also expand into other areas, sources said.
"There is no formal deal at this time but discussions are under way," said the source. "There is potential for a broad relationship."
IBM's Technology Group, which oversees the chip business, has been on a tear during the last six months, cutting deals with Dell Computer, Acer, and EMC for the supply of a wide range of IBM hardware, including chips, liquid crystal displays, and hard drives. Any agreement with Compaq would extend IBM's strategy of establishing a broad, flexible relationship with a customer, the source said.
Compaq manufactures Alpha servers and Alpha workstations for high-end corporate customers running software for databases and complex scientific applications. The Houston-based computer manufacturer inherited these from what was formerly Digital Equipment.
Samsung is currently a supplier of Alpha chips to Compaq. Samsung has stated that it is now shipping Alpha processors at 667 MHz and is planning to ship 1-GHz chips next year.
By comparison, Intel is preparing to begin shipments of a 600-MHz Pentium III processor on Monday and Advanced Micro Devices is expected to announce shipments of Athlon (formerly K7) chips in the next few weeks running at speeds as fast as 600 MHz, and later at 650 MHz and 700 MHz.
Compaq appears to be betting on IBM's copper technology.
"A copper [manufacturing] process provides better performance," said Nathan Brookwood, a principal at Insight 64, a Saratoga, California, consultancy. Though the economic viability of Alpha technology has been called into question by some analysts because of Intel's determination to close the performance gap with Alpha and its formidable marketing machine, Brookwood said that Alpha retains distinct, irrefutable advantages.
"Anybody concerned about floating point performance has a reason to stay with Alpha. This is way above Intel," he said. Floating point processing is critical for scientific and engineering applications.
Upcoming multiprocessor Alpha technology for servers also is ahead of Intel, Brookwood said.