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New IBM unit switches on electronics

Big Blue unveils its new unit, which is dubbed IBM Engineering & Technology Services and specializes in designing advanced tech products for electronics companies.

IBM on Monday unveiled a new services unit that specializes in designing advanced technology products for electronics companies.

The new business, dubbed IBM Engineering & Technology Services, will pool Big Blue's capabilities across many of its far-flung units. Its engineers will focus on creating complex chips for entire systems based on IBM's intellectual property, products and services.

The Armonk, N.Y.-based company has quietly shifted more than 700 design engineers worldwide into the new unit and plans to increase that number to more than 1,000 by next year.

The company said it plans to take a "skills-on-demand approach" to linking customers with engineers who are familiar with IBM's intellectual property. "We also will be a portal into other parts of IBM, such as financing, research and development, and consultants who innovate, integrate and accelerate time-to-market," Pat Toole, general manager of the new unit, said in a statement.

The unit is targeting several industries where IBM already has a customer base, including defense, aerospace, consumer electronics and communications. Some companies using the services of the new unit include the New York Stock Exchange, Sony, Minolta and Medtronic, a medical device maker.

IBM's entry into this market couldn't be better timed, according to analysts who note that the size of many in-house design teams is being cut down during the economic downturn. IBM, however, has an extensive network of engineers and research fellows who can help create customized chips and boards for each company's products, analysts said.

"Other companies don't have the geographical number of offices that IBM has," said Richard Doherty, president of research group Envisioneering. "These engineers can plug into their existing, proven models."

Other companies providing such services include Cadence Design Systems and Intel.

In the past, IBM has been criticized for spending large sums on research and development, an investment that did not provide practical returns. The new business unit may be a step in countering that belief. Analysts said IBM is now more open to licensing its technology.

"For many years, IBM was reluctant to share technology. And under (former CEO) Lou Gerstner, IBM saw an opportunity to share and leverage their technology from a licensing point of view," said Bob Sutherland, an analyst at Technology Business Research.

IBM said the division will help create chips or systems for other companies even if those products wind up competing with IBM's own lines.

The Engineering & Technology unit was in the making for about 10 months and "stems from the management's study to figure out new revenue streams and where they could grow the business," an IBM representative said.

IBM plans to offer some of the following specialized technology services:

• Business process services to manage intellectual assets and manufacturing consulting.

• Improved technological efficiency through silicon design and yield analysis.

• Help with hardware and software integration and testing.

• Technology outsourcing with IBM running the semiconductor fabrication operation services.