Server start-up banks on 64-bit design

Newisys, a server start-up founded by IBM alumni, is trying to hit the big time by bringing Advanced Micro Devices' chips to the corporate market.

The Austin, Texas-based company hopes to make its mark by designing rack-mountable servers using AMD's forthcoming Opteron processor.

Although a relatively small company, Newisys comes to the market with some interesting strengths. For one thing, rather than try to make money by building and selling machines itself, the company primarily plans to license its designs to partners that will manufacture the product under their own brand names.

So far, about 50 of the machines with test versions of AMD's Opteron chip have been seeded out to various companies. Newisys said that three top-tier U.S. server makers are evaluating its design.

"Our goal in life is to be a technology provider to those companies," Newisys CEO Phil Hester said, adding that as many as 1,000 servers will be in the field by launch time early this year.

If successful, the licensing model could prove to be a boon for AMD--whose 2003 marketing strategy hinges on servers--and provide an avenue for Opteron into the Fortune 500. Opteron is expected to provide fairly strong performance. Server makers, though, are notoriously conservative and generally adopt new technology slowly. A Newisys design could let them bring an Opteron box to market without expending resources on research and development.

Moreover, Newisys' executive team wields a well-connected Rolodex. Hester ran IBM's RS/6000 server program in the early 1990s. Rick Oehler, the company's chief technology officer, ran IBM's successful Enterprise X chipset program for Itanium and Xeon servers and was an IBM fellow. Former Dell Computer executives run sales and human resources.

Mike Maples, a former executive vice president at Microsoft, sits on Newisys' board. Fidelity Ventures, the venture wing of the mutual fund giant, is an investor and has a board seat, too. Newisys, which is about 2 years old, has around 120 employees.

"The company clearly has high-powered people in there," said Nathan Brookwood, president of consulting firm Insight 64, adding that besides connections, these executives understand the decision-making process inside the IBMs of the world--Newisys' potential customers.

But the hardware market is notoriously tough on start-ups, and Newisys faces a number of obstacles in the conservative server market. Challenges range from establishing its name to launching a brand-new product based on a new chip and convincing big PC makers to adopt its design.

A bumpy ride
That ride has proven rough for some. RLX Technologies, for one, burst onto the scene in early 2001 with "blade" servers. The company, founded by former Compaq Computer executives, signed up IBM early on to resell the svelte devices.

But once the blade server category became more established, most of the largest server manufacturers jumped in with their own blades based on their own designs, creating a much tougher environment for the start-up. IBM discontinued its deal with RLX and set out on its own, launching its BladeCenter product line in April. Dell, Hewlett-Packard and Sun Microsystems now have their own blade servers as well.

But Newisys is using a slightly different approach, taking advantage of server manufacturers' tendency to work with outside designers and, in some cases, outside manufacturers. One precedent here was set by chipmaker Intel, which sells a line of components, including motherboards, enclosures and entire servers, to manufacturers for use in building or marketing Itanium 2 servers under their own names. Intel also designs Xeon servers for its customers.

The hard part for Newisys will be proving its ability to deliver. But the company's designs are fairly sophisticated, Brookwood said, and take into account design methods and features that IBM or HP would use when targeting corporate customers--such as the abilities to resist crashing and to easily swap out components.

"I think they differ from RLX in several key regards," he said. "They have a very different business model in that their aim is to license their design to some top-tier server OEMs (original equipment manufacturers), unlike RLX, which wants to sell hardware to those OEMs, who then resell it."

The first product from Newisys will be a two-processor Opteron server. The company also is expected to introduce a four-processor server capable of connecting with other four-way servers to create machines with eight, 16 or more processors.

The two-processor machine, designated 1U for its 1.75-inch thickness, will debut in tandem with the introduction of AMD's Opteron, which is expected later this quarter or early next quarter.

Its four-processor sibling is expected later in the year.

The new machines should be no more expensive than similar servers available now, Hester said, but they will offer companies the ability to run both 32-bit and 64-bit operating systems and applications.

Even if companies don't plan to switch immediately to 64-bit software, Newisys or its customers can market the servers in part by emphasizing preparation for the future. For servers running large databases or other intensive applications, switching to 64-bit capabilities provides a performance boost by enabling the use of much larger amounts of memory.

Once released, the Opteron chip is expected to run at about 2GHz. Analysts such as Brookwood believe it should be able to match an equivalent 3.5-to-4GHz Intel Xeon chip.