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Compaq dumps Unisys from server line

In a major blow to Unisys, Compaq Computer has joined Hewlett-Packard in canceling a deal to sell powerful Unisys high-end servers.

In a major blow to a Unisys plan to make its high-end servers a standard part of many company's product lines, Compaq Computer has joined Hewlett-Packard in canceling a deal to sell the powerful Unisys computers.

The Unisys "Cellular Multiprocessing" (CMP) server, which can house as many as 32 Intel processors, is the cornerstone of Unisys' strategy to have other companies sell its products under their own names. The Blue Bell, Penn., company had signed up Compaq for the program first, then Dell Computer and HP.

But Compaq decided to spend its marketing and customer support money in a more lucrative, lower-end segment of the market for servers running Microsoft's Windows operating system, said Mary McDowell, general manager of Compaq's Intel server line.

It's a major setback for Unisys, an old-line computing company that had been depending on the CMP server to help raise its profile during trying times. The company's revenue grew from $1.5 billion in the first quarter of 2000 to $1.6 billion in the first quarter of 2001, but its net income dropped from $107 million to $69 million.

Unisys representatives didn't immediately comment on the change.

Compaq said eight-processor systems had much more appeal to large corporate customers building "data centers" stuffed full of computers.

"As we were aggressively moving after the data center market, 95 percent of them were landing on eight-way computers. The right business decision was to focus sales and support around the ProLiant eight-way," she said.

Compaq will stop selling the Unisys system on May 31. Earlier this month, Duane Zitzner, head of HP's computing group, said earlier this month that his company wouldn't even begin selling it.

That means the only companies selling the 32-processor system are Dell and Unisys itself, which markets the product under the name ES7000.

Earlier, company representatives expected sales partners such as Compaq to sell most of the systems, with two-thirds of CMP revenue coming from other companies. At the beginning of March, Unisys itself had sold 320 of the systems.

Unisys also is hoping to sell the CMP systems running its mainframe operating systems, a business that's declining not just for Unisys but also for mainframe market leader IBM.

Meanwhile, HP and Compaq are working on high-end Intel server designs of their own. Compaq is planning an eight-processor server based on Intel's coming Xeon processor--a high-end version of the Pentium 4. It's also building a 32-processor system using "McKinley," the code name for the second-generation Itanium chip with which Intel hopes to conquer even higher-end server markets.

HP, which co-developed the Itanium chip line but expected it to arrive much earlier, said it had chosen to focus its attention on designing its own Itanium systems instead of Unisys' CMP systems.

The CMP systems are designed to accommodate the Itanium line, a totally different chip design from Intel's current products. Unisys also is designing a successor called CMP2 that could accommodate 64 CPUs later, the company said.

One problem with the 32-processor systems is that software generally works better on eight-processor systems, McDowell said.

It's difficult to get software--operating systems such as Windows or Linux or higher-level software such as databases--to be able to take advantage of all the CPUs in a large multiprocessor server.

"Most of the applications, from the performance standpoint, are best served on an eight-way platform," McDowell said. Customers who bought CMP systems with more than eight processors typically "partitioned" them into several systems, each with eight processors, she said.

The Unisys servers were a key part of Microsoft's launch last September of its highest-end operating system, Windows 2000 Datacenter. This version, designed to be more reliable and faster than its lower-end brethren, can work on systems with as many as 32 processors.