HP server chip group transferred to Intel

Under the tech industry's equivalent of a player trade in the sports world, close to 100 HP engineers have moved over to Intel to develop chipsets for future Intel-based servers, according to sources.

The group will likely work on technology for Itanium, the 64-bit server chip co-developed by HP and Intel. Itanium servers are designed to compete against large Unix/RISC servers from Sun Microsystems. In that market, Palo Alto, Calif.-based HP primarily markets servers based on its PA-RISC chips, but the company plans to migrate to the Itanium family over the next few years.

At HP, the group worked on chipsets that could be used with PA-RISC or Itanium processors.

An Intel representative declined to provide the number of engineers sent to Intel in the deal but confirmed the outlines of the deal and stated that virtually all of them have already accepted positions at the Santa Clara, Calif.-based chip giant.

"We've entered into an agreement with them to accelerate the development of Intel server chipsets," the representative said.

By acquiring HP's engineering talent, Intel will expand its server intellectual capital. For years, Intel has dominated the research and development surrounding PCs. Servers, however, are much more complicated beasts and require companies to have expertise in multiprocessing, intricate input-output subsystems and other technology.

Intel has engaged in server development, but most of its work has been concentrated on boxes with eight or fewer processors. Some future Itanium systems will contain hundreds of processors. Although they don't enjoy as glamorous a reputation as processors, chipsets play an equally important part in servers. Chipsets effectively control the flow of data and prevent data corruption.

More engineers may migrate from HP to Intel in the future, predicted Linley Group analyst Linley Gwennap. HP still employs about 200 engineers who work on "McKinley," the next version of Itanium due out in test systems later this year, and McKinley's successors. HP and Intel designed Itanium together, but Intel will manufacture the chip. These engineers will likely transfer, although HP will probably keep its PA-RISC team in-house.

"If you are Intel and you invested a lot of money in Itanium, does it make sent to have part of it in control of another company?" Gwennap said. "A year ago, HP planned on differentiating on Itanium by doing a lot of their own design. Now they are looking at diffentiating on software and differentiating on services."

In June, Intel entered into a broader, but conceptually similar, agreement with Compaq. Under that deal, Intel acquired a license for Compaq's Alpha chip, compiler technology in Compaq's possession and most of the Alpha engineering team. HP made a bid to acquire Compaq earlier this month.

Intel acquired approximately 200 Alpha engineers in that deal and will likely acquire more over the next 28 months, the Intel spokesman said.

In these sorts of deals, the personnel and engineering know-how is often far more important than patents or product plans. In one of the biggest personnel coups of the past few years, Advanced Micro Devices was able to recruit Dirk Meyer away from the Alpha design team. Meyer went on to manage the development of the Athlon chip for AMD.

For its part, HP will be able to reduce its independent research budget. Part of Itanium's appeal lies in the fact that servers built around the chip are expected to cost less than servers where all the crucial internal technology comes from one or two companies.

Instead of spending time and money developing processors or multiprocessing chipsets, companies like IBM and HP will just have to buy these parts from Intel.

"This is a way to cut your R&D budget," said Dean McCarron, principal analyst at Mercury Research. "You are already reducing your processor R&D budget."

In a research note, analyst Ashok Kumar of US Bancorp Piper Jaffray stated that HP "recently terminated an internal Itanium chipset, transferring the design and the design team to Intel, because it couldn't afford the effort."

The alliance could also likely lead to Intel fabricating some chips on behalf of HP. HP's Unix servers, beginning with the N-class system introduced in 1999 and including the top-end Superdome, have been designed to accommodate either Itanium or PA-RISC chips.

Although HP is migrating over to Itanium, the complete conversion is still a few years off. Intel therefore is the logical party to make chipsets for Superdome and other HP Unix servers.

Chipsets that can work with two types of processors are becoming more common, noted Nathan Brookwood, an analyst at Insight 64. IBM's Summit chipset, for instance, can connect to both Xeon processors and an upcoming version of Itanium code-named McKinley.