Intel takes on Sun with telecom servers
Looking for new sources of revenue, the chipmaker is set to challenge Sun Microsystems by launching a line of telecommunications servers later this year.
On Thursday Intel announced plans to build telecommunications servers and sell them via PC makers or telecommunications-equipment companies. Intel said the move will challenge Sun, which enjoys a healthy telecommunications-server business.
The move is reminiscent of Intel's earlier moves into the high-end workstation market, where Sun is also a major player.
The telecommunications thrust is classic Intel: Attack an established competitor in a new market with large numbers of inexpensive computers offering "twice the performance for half the price," said Abhi Talawalker, vice president and general manager of Intel's Enterprise Platforms and Services Division.
"One of the areas where we have not been very active has been in the telecommunications and communications space," Talawalker said. The new server products "are responding to a decent amount of interest (Intel has seen) over the past few years" from customers in that market.
Intel will not sell the servers directly to telecommunications customers. Following a model the company established with its network-appliance systems, Intel will sell the servers to PC makers and to telecommunications-equipment companies, which will then add operating systems and applications and resell them to customers.
In 1997, Intel launched an effort to break into the workstation market. The company signed up PC makers to build workstations that would challenge the machines sold by Sun and Silicon Graphics, which at the time offered a high-end workstation based on its own processor.
Known as NT workstations after Windows NT, the machines were initially more like high-end PCs and could not match the performance of a Unix workstation. However, the NT workstation took off in market share thanks to its lower price, sometimes less than one-third of that of a Unix workstation.
PCs out, servers in
Success in the telecommunications market would also mean a healthy boost to Intel's bottom line. While PC margins continue to shrink, servers are still commanding relatively high prices.
Analysts said on Thursday that Intel could make inroads with its new servers in areas where companies are looking to expand--such as wireless--but only if the company can meet the stringent requirements of telecommunications customers.
Cost is not the only thing telecommunications companies evaluate when they choose new servers. Intel will also need to demonstrate that it can offer reliability, analysts said. Telecom companies may also consider the ease of upgrading servers as well as their overall cost to maintain before buying. Many companies keep equipment for as long as five to 10 years.
Executives from Sun agreed that building telecommunications servers consists of more than assembling hardware or hitting a low price. Sun introduced its first NEBS certified telecommunications server, the Netra, in 1999.
Executives at the company believe that over the average life of a telecommunications server, which ranges from five to as many as 20 years, the initial price is less important than built-in abilities such as being able to perform a repair or upgrade--adding a faster processor, for example--in the field.
"Every component of my Netra CT servers is field replaceable or repairable," said Bret Martin, a group manager inside Sun's Network Equipment Provider Division. "This gives (telecom companies) the ability to increase the horsepower as we move forward (with technology) without changing out the machine again. It's the serviceability, the reparability and the maintainability that separate us."
Hewlett-Packard on Thursday announced it would use the new Intel servers in machines aimed at voice and data networks. The companies, in addition, opened a joint "telecommunications solutions center" in Grenoble, France, where much of HP's PC division is based. The center, among other functions, will offer a place for potential Intel server customers to test the new equipment. It will also allow software developers to test their work.
Intel plans to begin shipping single- and dual-processor Pentium III-based servers in 1U (1.75 inches high) and 2U chassis in the fourth quarter. The servers will meet telecommunications specifications, such as NEB Class III, which requires that servers be able to withstand conditions such as fire or earthquake.
The first servers will be based on Intel's forthcoming 1.13GHz "Tualatin" Pentium III chip. Tualatin is Intel's code name for Pentium III chips manufactured using the company's new 0.13-micron process.
Intel plans to follow up on these first telecommunications servers with later servers offering its new Xeon and Itanium processors.