IBM are a huge company, but now generally make state-of-the-art servers and are by no means destroyed.
And yes, they do make the 360's cpu, as well as Nintendo's upcoming console, codenamed 'Revolution', and that alone proves they are a very able company.
They would definitely give AMD and Intel a run for their money if they entered the PC CPU market.
Intel Core 2 Duo E8400 @ 3.7GHz
4GB OCZ PC-6400 RAM
Samsung Spinpoint 1TB HDD
ATI Radeon HD4890 with VoltageTweak
OCZ Stealth XStream 600w PSU