In 2003, HP will upgrade its 64-processor Superdome with a 128-processor goliath using HP's PA-RISC 8800 chips, said Mark Hudson, worldwide marketing manager for HP's business systems and technology organization. The 8800 chips combine two CPUs on a single slice of silicon, a technique pioneered by IBM with its new Power4 chip.
The mammoth system and a host of upcoming related models are the foundation of HP's attempt to boost its Unix server business, and to a certain extent the entire company, at a pivotal time. The company is struggling with plunging revenue, massive layoffs, the acquisition of Compaq Computer and conflicts between the company and its Unix server sales partners.
HP, the No. 2 Unix server seller according to sales figures from research firm IDC, is seeking to fend off a newly scrappy IBM in third place while assaulting Sun Microsystems, still the top dog of the Unix server market but now vulnerable during the economic slump.
"While the perception is that the Unix server market is now effectively a two-horse race between Sun and IBM, this simply does not stand up to scrutiny," SG Cowen Securities analyst Richard Chu wrote in a recent report. "In part because of very weak demand from the very markets that propelled Sun (telecommunications, dot-com, broadband and service providers), the combined HP-Compaq entity is likely to emerge with a somewhat more significant footprint in Unix servers circa 2002."
The server line is key for HP: Sales of the powerful machines tend to draw along sales of services, storage and software, three areas where HP is seeking to increase its revenue most strongly. Servers have better profit margins than hardware such as printers or PCs. And with Compaq discarding its Alpha-based Unix server designs in favor of Itanium systems, HP's Unix server division is free to move as fast as it can as HP tries to swallow Compaq.
But HP has perseverance, and a Superdome successor could arrive during cheerier economic times.
"HP introduced Superdome about one month before the bottom fell out from under dot-coms, and we've had worsening economic conditions ever since," said Illuminata analyst Jonathan Eunice. "It was a terrible misfortune, but the large server space is a marathon, not a sprint. HP is not giving up."
Time to attack Sun
And it's a good time to be going after Sun. Though the Unix server leader is benefiting from the September introduction of its 106-processor Starcat, it's suffering financially, with a 43-percent revenue drop in its most recent quarter.
"It is still too early to determine if weak bookings will come back in the December quarter--our own belief is that a recovery in orders will be delayed until the June quarter," UBS Warburg analyst Don Young wrote in a recent report on Sun.
Morgan Stanley's Rebecca Runkle said there are "no hints that demand will significantly improve over the next few quarters."
In the top end of the Unix server market--machines that cost $1 million and up--IBM and HP made gains, while Sun lost out in the second quarter, according to IDC. IBM's revenue increased from $154 million a year ago to $204 million, while HP's increased from $110 million to $150 million. Sun, meanwhile, saw revenue shrink from, $515 million to $390 million.
Sun's lead is still commanding, but instead of sales more than triple the next competitor's, they're less than double.
CPU count isn't everything
Processor count is but one part of the total measure of the power of a system. "Stupendous processor counts are not what separates the men from the boys in Big Iron--input-output (speed) and manageability is," Eunice said.
Indeed, with programs such as Oracle's database software, which cost tens of thousands of dollars for each CPU on which it's used, it makes economic sense to have smaller systems.
That issue, combined with the expense of building machines with oodles of CPUs and ancillary chips, led IBM to discard the idea of a 128-processor machine in favor of one with fewer CPUs and more communication capability.
HP's Hudson agrees with IBM's methodology. But a 128-processor system still is worthwhile, he argued. For one thing, technical computing customers with heavy-duty calculations such as automotive design need the larger systems.
More important, though, is that these gargantuan Unix servers can be divided into several independent partitions, each one an independent server. The technology, first introduced in Unix servers by Sun but now used by HP and IBM, means numerous smaller servers can be replaced by a larger, easier to manager machine.
More processors means more partitions and thus more consolidation, Hudson said. The effect is multiplied because HP's designs will be able to run Windows and Linux as well as its HP-UX version of Unix.
Itanium trickling into Unix line
HP's server line has other products to look forward to besides a new top-end Superdome. Some of the changes are based on the arrival of Intel's Itanium processor family, initially invented by HP but co-developed and now built by Intel.
Superdome will accommodate Itanium chips, but HP has pushed back the scheduled arrival date, Hudson said. Initially, HP said the Itanium-based Superdomes would be on sale in the second half of 2002, but now the systems could arrive as late as early 2003.
These systems will use the "best available" Itanium family chip--either the second-generation "McKinley" or its smaller and faster successor, "Madison," Hudson said.
Intel spokeswoman Barbara Grimes said Madison will be built using a manufacturing process with 130-nanometer (0.13-micron) features, a notch smaller than the 180-nanometer process of the McKinley line. Madison also will come with 6MB of high-speed "cache" memory instead of McKinley's 3MB.
The much-delayed Itanium family from Intel is a more powerful 64-bit design that's a radical departure from the 32-bit Celeron, Pentium and Xeon designs. So far, Itanium machines are chiefly used by a few technical researchers and those wishing to prepare software for the day when the systems could be more popular.
Many analysts believe Intel, with its vast manufacturing capacity, will be able to sell Itaniums more cheaply than prevailing high-end server chips such as HP's PA-RISC, Sun's UltraSparc and IBM's Power. But with Itanium's delays and difficulties, that prospect still is years away.
Hudson said HP expects revenue from Itanium-based servers to surpass current PA-RISC systems in 2004. It's a long-term strategy, Hudson said, but the design behind Itanium will last 20 years, he predicted.
More servers in the pipeline
Itanium family chips will first appear in traditional HP Unix servers in mid-2002, when four-processor L-class systems will accommodate McKinley designs, Hudson said. HP already sells two- and four-processor Itanium machines, but those systems can't accommodate HP's PA-RISC chips.
At the end of the year, HP's new PA-RISC 8700 chip will arrive in the L-class. And in mid-2002 comes "Olympic," a 16-processor Itanium system whose design HP licensed from NEC.
Perhaps more significant will be "bladed" designs, the naked motherboards that are stacked into a single enclosure like books in a bookshelf, allowing companies to fit more servers in a limited space. In contrast, most designs these days have only one server in each enclosure.
Bladed designs save floor space and energy, Hudson said, but a more important factor will be improvements to how easily the systems can be assigned en masse to different tasks and managed, Hudson said.
HP's first Intel-based blade designs, two-processor models, will arrive near the end of 2001, he said, while two-processor Unix server blades will arrive in mid-2002, Hudson said.
Is anyone listening?
Selling these systems will be difficult if HP continues to suffer from its also-ran image, though. "Regaining mind share in the Unix server market has been elusive for HP," SG Cowen's Chu wrote.
HP is tackling the problem with a high-level marketing campaign, Hudson said. The company will use an ad campaign, direct mail, seminars and other activities.
"I think you'll see HP be much more visible," Hudson said.