HP ponders a less-glorious Itanium future

Itanium is the foundation of HP's strategy to simplify its server portfolio: The company is moving three separate high-end server lines onto Itanium, and the Integrity product line will be able to run four operating systems. At the same time, it's expanded its lower-end ProLiant family from Intel's Xeon to include Advanced Micro Devices' Opteron as well.

The way server executives see it, HP's bets are hedged.

"We have decided that with the two-server strategy, ProLiant and Integrity, we're covered no matter what," said Rich Marcello, general manager of HP's Business Critical Server group. "If we do nothing more than take our Unix customers and move forward with them (on Itanium), we're fine."

AMD and Intel undermined an Itanium advantage by adding 64-bit extensions to these "x86" chips used in the ProLiant family, a change that makes it easier to handle large amounts of memory. AMD made the 64-bit move in 2003 and Intel will do so Monday with a new version of Xeon code-named Nocona.

HP's Itanium strategy will be "viable" even if the chip never achieves anything beyond replacing RISC (reduced instruction set computing) chips such as Sun's UltraSparc or HP's own PA-RISC, which is being phased out. Indeed, HP doesn't expect Itanium to escape that relatively narrow niche for three years, he said; after that, widespread success will depend largely on Intel marketing choices.

Kevin Krewell, editor in chief of the Microprocessor Report, sees HP as trying to moderate Itanium hopes. "It's a matter of lowering expectations based on the original promises of Itanium. It really has now settled into the niche of big-iron, Unix-RISC replacement," Krewell said.

And escaping a niche is hard. "Once the market has developed a perception of a product and typecast it, it gets more and more difficult to change the market perception of a product. With the cost structure involved for Itanium systems, it's hard to compete with Intel's real juggernaut, the IA-32 (x86) architecture--the Xeons, Pentiums and AMD's alternatives," Krewell said.

Itanium ambitions
HP and Intel once had higher hopes for Itanium, which arrived years later than hoped and has lost some of its once-broad industry support. HP invented the architecture behind Itanium then jointly designed the chip with Intel, which makes and sells it to many computer makers.

Intel, though, stands behind its current long-term success plan for Itanium. "The 2007 time frame is where we're talking about system cost parity," in which Xeon and Itanium servers will use much of the same hardware and will cost the same, Intel spokesman Scott McLaughlin said. "But at the same time Itanium will have twice the performance of Xeon. That's when we start to see from an economic standpoint it becomes a lot more appealing."

In HP's most recent quarter, 16 percent of its high-end server revenue came from its Itanium-based Integrity line. "We expect it to cross over to the 25 to 35 percent range by the end of the year," Marcello said.

And HP genuinely can declare something of a victory if it moves customers of its disparate AlphaServer, 9000 and NSK lines to Itanium-based machines, said Insight 64 analyst Nathan Brookwood. "If it can migrate that base and coalesce it around Itanium, it will have been a huge win for HP," he said.

HP sells more servers than any other company, but IBM's sales of mainframes and other expensive systems gives Big Blue the server revenue lead. Sun Microsystems has been waning, but Dell continues to gain. IBM and Sun are actively trying to lure HP customers, who most often switch to new systems.

HP isn't in an Itanium-holding pattern. One new system, planned for mid-2005 release, is a thin "blade" server that will plug into the same chassis that currently houses HP's x86-based blades, said Brad Anderson, general manager of HP Industry Standard Servers, which oversees x86 models and the current blade systems.

Next up: Itanium 2 9M
Next on the agenda is an upgraded "Madison" model of Itanium 2 called 9M that boosts high-speed cache memory from 6MB to 9MB. Though Intel released earlier Itanium models in May or June, Marcello said the Madison 9M will arrive in the fall.

A likely time frame could be Intel's Developer Forum, scheduled for Sept. 7 to 9 in San Francisco, where Intel often unveils major new products and initiatives. Intel declined to comment on timing beyond reiterating plans for a launch in the second half of the year.

"November or December would be late. October is probably marginal. I would expect it in the third quarter," Krewell said.

After Madison 9M will come "Montecito" in mid-2005, a chip that shares the same technology to plug in to a server but otherwise is different from earlier Itanium chips. For one thing, it includes two processor cores on one slice of silicon.

HP and Intel completed the Montecito design in recent weeks, Marcello said.

Though Montecito could theoretically plug in to the same sockets as its predecessors, Marcello said doing so would be unlikely because it consumes more power and consequently releases more heat.

Current higher-end Itaniums dissipate a maximum of 130 watts. Low-power Itanium models can go as low as 30 watts, Marcello said.

The ProLiant stronghold
HP's server strength remains its ProLiant line, one of the key acquisitions from Compaq Computer. HP currently has no plans to sell high-end ProLiant machines with more than eight processors, Anderson said. IBM and Unisys opted for a different strategy, with 32-processor Xeon servers on the market.

Dell, the second-ranked x86 server seller, is the more imminent threat, though, and HP is fighting aggressively with price cuts.

Some of the market share losses to Dell "we brought upon ourselves," Anderson said. "ProLiant was the workhorse of the portfolio. We let the price creep up because of profitability concerns."

When HP found customers not even requesting bids, it took pricing action. In terms of percentages, "our pricing is now within single digits of Dell," Anderson said. Indeed, one recent study by Illuminata found HP's x86 servers were consistently less expensive than Dell's.

HP accepted AMD's Opteron chip into the ProLiant line earlier this year. The company has embraced it more warmly than has IBM, which after an early lead in 2003 continues to sell Opteron systems only for the high-performance computing market, and Dell, which doesn't sell Opteron at all.

The most enthusiastic Opteron server maker is Sun, which hopes its acquisition of a start-up focused on the AMD chip will help boost its tiny x86 market share.

HP's Opteron blade servers will arrive in the fourth quarter, Anderson said. Opteron chips have a major advantage right now over Xeon when it comes to blades, where space constraints are tight, and overheating can cause major problems. The Opteron chips run about 20 percent cooler than corresponding Intel products, HP said. However, with future chips, that advantage "may or may not continue," Anderson said.