IBM's Triple Play

Johnson came to change the minds of Microsoft executives. The new IBM research unit had been formed specifically to do custom projects for high-profile clients. It could build microprocessors for the next-gen Xbox to Microsoft’s specs—and still save time and money by doing so on the back of technologies that IBM already had in the works, he said. Soon after Johnson’s visit, the Microsoft account was IBM’s.

“Microsoft knew their business,” says Schram, who led the development of the new custom chip for the Xbox 360. “They understood what kind of experience consumers would want from this product. We helped them translate that user experience.”

Microsoft also needed a console that would stay competitive for several seasons. It required realistic game physics and HDTV (high-definition television) resolution that had become the industry standard. IBM’s processor would need to be blazingly fast, but also efficient and durable. Schram and his group filled the bill with a processor that contained three separate “cores”—essentially, the processor’s brains—all working in tandem and supporting each other. They also designed technology that allowed the system’s separate graphics and memory chips to communicate.

Engineers are building on Cell technology to create the world's first petascale—as in "able to perform one thousand trillion calculations per second."

Just as important, they made a shift in mindset. Microsoft planned to launch its new Xbox in time for 2005 holiday season sales. “It doesn’t matter whether IBM gets a server to market in December or April,” Schram says. “But it took a little while for us to realize, ‘They’re serious—we cannot miss this deadline.’”

The chip didn’t come cheap. It accounted for about 20 percent of the Xbox 360’s pre-assembly cost. Microsoft sustained early losses on the product while the manufacturing was being streamlined. But that initial outlay has been more than made up for: By the end of April this year, cumulative sales of the Xbox 360—priced at roughly $300 to $450—hit 19 million units, helping Microsoft’s earnings jump by two-thirds during the first quarter of 2008.