Apple dishes up rack-mounted server

The Cupertino, Calif.-based company in May unveiled Xserve, which runs Unix-based Mac OS X.

The company made the Xserve announcement Monday. Apple had planned to announce availability last month but held off a bit, according to sources familiar with the product strategy. Shipping the products in July could allow Apple to record the sales in its fourth fiscal quarter. In mid-June, the company warned that it would miss third-quarter estimates by as much as 3 cents a share.

Apple says that it has received a healthy crop of early Xserve orders--more than 4,000.

Apple started shipping the first of the servers to customers late last week, Alex Grossman, director of hardware storage, said Monday. Grossman did not say how the 4,000 orders compare with Apple's past server efforts but said "it's definitely a great start."

Apple plans to follow up with a mass storage device known as Xserve RAID, which it has said will ship by the end of the year.

Xserve is available in three basic configurations, although Apple also offers the pizza-box-size, rack-mountable server on a build-to-order basis.

Some notable features: Each unit can support up to four 120GB hard drives; the PowerPC processors come with 2MB of level-three cache memory, for throughput of up to 4GB per second; memory is expandable to 2GB; and the software package includes the Apache Web Server and QuickTime Streaming Server.

The $2,999 entry-level model features a 1GHz PowerPC G4 processor, 256MB of double data-rate SDRAM, a 60GB ATA/100 hard drive, a CD-ROM drive, dual Gigabit Ethernet networking ports, two USB 1.1 ports, three FireWire ports and Mac OS X Server with a license for an unlimited number of users. The midrange $3,999 model adds a second 1GHz PowerPC processor and boosts memory to 512MB. The top-of-the-line $7,999 model increases the memory to 2GB and storage to 480GB.

Apple also released benchmark data that it claims shows Xserve's merits over servers from Dell Computer, IBM and Sun Microsystems. Apple says that running the Apache server, Xserve can support 60 percent more connections--4,051 per second vs. 2,547 per second--than the IBM eServer x330. Apple also says that using the four-drive configuration, Xserve provides sustained throughput of 110MB vs. 70MB for Dell's PowerEdge 1650.

"The results of the benchmark tests indicate that the product has some competitive position with IBM, Sun and Dell," Technology Business Research analyst Tim Deal said. "It...adds credibility for any market Apple wants to get into--but certainly the corporate market."

Betting on streaming
Xserve puts Apple in a position to wrestle some market share from Linux, which is one of the most popular operating systems for running Apache Web Server. Apache was run on 64.4 percent of Web servers in June, according to researcher NetCraft. But Microsoft Web server products have been slowly gaining on Apache.

"This certainly places Apple head-to-head with Linux, considering they did release the benchmark metrics about how well it did with Apache Web Server," Deal said. "I think the Unix-based operating system will attract some Linux users. But I can certainly see battle lines being drawn between Linux users and potential Xserve users."

Xserve's most important role for Apple could be bolstering the company's position in digital media streaming.

"The majority of (digital) content is created using QuickTime," Gartner analyst Paul-Jon McNealy said. QuickTime is Apple's media creation-and-playback technology that competes with RealOne from RealNetworks and Windows Media from Microsoft.

But most of that content is then converted to the competing formats, which have more market share than QuickTime. The fact that there are different formats means that consumers must use multiple players if they want full access to all the streaming content on the Web.

By offering a rack-mounted server with QuickTime streaming software, Apple is strengthening its position for a head-to-head competition with Microsoft and Real, say analysts. That would also play into Apple's strategy to back the MPEG-4 video technology over proprietary formats.

MPEG-4 is the successor to MPEG-1 and MPEG-2, technologies instrumental in delivering digital broadcast transmissions over cable, satellite and the Web. MPEG-2 is the video standard adopted by Hollywood for DVDs. MPEG-4 also is seen as a possible successor to MP3, the hugely popular audio format for compressing music digitally.

Apple introduced QuickTime 6, which fully supports MPEG-4, in February. But Apple delayed releasing the new version because of a licensing scuffle with MPEG LA, the group holding patents on the technology. Then, in an unexpected turnabout, Apple last month released a QuickTime 6 Preview, with CEO Steve Jobs suggesting the licensing issue might soon be resolved.

"The preview release of QuickTime 6 is an important move because it suggests that there has been some compromise, or they're pretty sure there's going to be some compromise, on the part of MPEG LA in terms of changing the proposed licensing terms," IDC analyst Susan Kevorkian said.

"For the creation-tools standpoint, QuickTime 6 is pretty neat," McNealy said. "MPEG-4 could help Apple because it's going to give them a huge leg up because of the advantages of the content creation area."

Using QuickTime to do authoring for MPEG-4 offers advantages for "reducing the expenses incurred in actually producing content in a given format and then delivering it," Kevorkian said. "At the end of the day, that's what we're talking about when we're talking about a universal format that all the content providers use and every consumer can view on their desktop."

Phil Schiller, Apple's senior vice president of worldwide marketing, sees moving beyond proprietary digital media formats as essential for the medium's success, particularly on the Internet.

"Imagine if you had to buy a different TV for the different channels you want to watch," he said. "What if you...had to have three TV sets depending on whether you were watching NBC, ABC or CBS because they each used their own formats? What a mess that would be."

News.com's Ian Fried contributed to this report.