Egenera, a 50-person company in Marlboro, Mass., has begun describing a sophisticated server design it hopes will appeal first to financial services companies when it goes on sale this fall. And the company has a strong calling card for that market: Chief Executive Vern Brownell was chief technology officer of Goldman Sachs before he left to join Kenneth Zolot in starting Egenera in March 2000.
"I think it is a fairly narrow market, but it's a fairly rich market," Illuminata analyst Jonathan Eunice said of the financial services niche.
Indeed, Goldman Sachs and Credit Suisse First Boston are among those beta testing the "BladeFrame" servers, which will cost hundreds of thousands of dollars apiece, Brownell said in an interview. They're also among the investors. Along with Kodiak Venture Partners, Spectrum Equity Investors and Zolot's YankeeTek Ventures, they've poured $20 million into Egenera.
Egenera's status as an unknown is both an advantage and a problem, Robert Frances Group analyst Cal Braunstein said.
"Their biggest selling inhibitor is that they're an unknown," he said. "If they can win a few accounts here and there, stay below the radar (of major server companies), they're going to survive. If they get too far above the radar line, they become a target."
A novel design
Egenera's server, which will stuff as many as 96 of Intel's coming Xeon processors into a single six-foot rack, taps into the trend toward "ultradense" designs that major server companies have embraced. These designs use "blades"--numerous servers stacked in the same enclosure like books in a bookshelf or plates in a cupboard.
But Egenera adds high-end hardware that distinguishes its product from designs expected later this year from Compaq and IBM.
For one thing, the server has a special "BladePlane," a high-speed connection that substitutes for the profusion of network, power and storage system cables that complicate current rack-mounted servers. The system also has software and control systems that make it better able to adjust to changing computing requirements or hardware failures.
One interesting feature of the design is the fact that each 1.75-inch thick server "blade" is either a two-processor or four-processor design using Intel's coming Xeon chip, the server version of its current Pentium 4 CPU. Currently, it's tough to squeeze two lower-powered and thus cooler chips into a 1.75-inch thickness, but Egenera is able to accomplish the feat in part by not having to include disk drives and other components in the rack.
Though four-CPU servers are reasonably powerful, Brownell said Egenera's system is designed to be connected to even more muscular servers when a customer needs to run larger databases or other demanding jobs.
Egenera's servers run a modified version of Red Hat's Linux called Egenera Enterprise Linux, Brownell said. Linux, a clone of the Unix operating system popular at financial services and telecommunications companies, is a comparatively new entrant into the world of high-end computing.
Brownell believes there is healthy and growing support for Linux among software companies whose products would run atop the Unix clone.
The biggest constraint in Egenera's use of Linux is that, "You're telling executives I'm going to bet this corner of the business on Linux," Braunstein said. "We're not seeing a lot of that yet."
But Eunice points out that much of the software financial services companies run is their own, and moving it over from Unix to Linux isn't a very big change.
The company's first product, code-named "Bolton" will be introduced this fall, most likely in October, Brownell said. In the first half of 2002, "Stow" will arrive, adding features that can automatically shift computing tasks from one server to another. In the second half of 2002, "Hudson" will bring "appliance builder" software that automatically adjusts how the server behaves according to what type of job it's doing.
Competition and a lousy economy
Egenera is coming out from under wraps at a time when server companies don't have as lucrative a market to tap as in the go-go days of the Internet.
Brownell acknowledged that the current economic climate is sour for starting new companies. "However, if we'd started a year earlier, some of the technology wouldn't have been there," he said. And financial services companies and other large customers still need new servers. "There's a very healthy, ongoing business."
And the competition is fierce, especially now that the pool of money for buying servers is shrinking.
"They're not the only ones that are going to have bladed servers," Eunice said. "There are several major (server makers) that by the end of the year will have bladed servers," including IBM and Compaq. IBM's Oceano project, part of the company's eLiza effort to create self-healing servers, bears some similarity to Egenera's products, he added.
IBM also is pushing its mainframes, which can run hundreds of versions of Linux at the same time, for use at telecommunications and financial services companies.
Start-ups have been bubbling up in the server market, drawn by the success of companies such as Sun Microsystems, but jumping ahead of the established server makers. Many of these companies have concentrated on building special-purpose "server appliances" designed to do a specific job faster or more easily than general-purpose brethren. But many of these start-ups have struggled as the market for building Internet computing infrastructure has withered.
Network Engines pioneered the market for rack-mountable servers that crammed two processors into a skinny 1.75-inch height, but it's now suffering. Cobalt Networks had a strong niche selling servers to those setting up Web pages, but it was acquired by Sun. CacheFlow, which makes specialized servers for speeding up the delivery of information over the Internet, has maintained its independence, but its stock currently is trading at about $7, compared with more than $150 about six months ago.