Both companies appear ready to reverse an earlier decision that they would continue to support some versions of Windows NT on the high-end chip. The reversal would put an end to confusion over the fate of Windows NT on Alpha.
Microsoft had been gearing both the 32-bit and 64-bit versions of Windows NT for Compaq's high-end chip. Intel's next-generation Merced processor will run both versions of the operating system, which is geared for businesses.
The controversy over commitment to Alpha started late last week when Compaq informed about 100 engineers at its Bellevue, Washington, facility of impending layoffs. Many of the engineers were involved in the development of Windows NT and Windows 2000 on Alpha. Windows 2000 is the renamed Windows NT 5, due out later this year. ( See related story.)
Compaq responded to conflicting media reports and a backlash in Internet newsgroups by conceding it would stop development of 32-bit Windows 2000 but would continue to support Windows NT 4.0 and 64-bit Windows 2000.
Microsoft yesterday acknowledged it will also cease development of 32-bit Windows 2000 with the so-called Release Candidate 2, which is due by mid September.
A spokesperson yesterday reaffirmed Microsoft's commitment for 64-bit Windows 2000 on Alpha and promised a commercial version of the operating system if Compaq supported it.
That support is now seriously in question. The problem, said sources close to Compaq, is that the company acted before it had a plan firmly in place. "Compaq failed to communicate clearly within, with Microsoft, industry analysts, customers, and the media," said one source, who asked not to be identified.
There also appears to have been some confusion among managers about strategy because of Compaq's strong partnership with Microsoft. Executives did not want to alienate Microsoft with a complete Alpha retreat. Alpha also has strong advocates within Compaq.
But top-line managers looking to lay off as many as 8,000 people and trim unprofitable units appear ready to make the hard decision.
"This is purely an economic move," said Terry Shannon, publisher of the Shannon Knows Compaq newsletter. "If you look at the breakdown of Alpha revenue over the last several years, NT doesn't cut it."
Microsoft apparently backs the move, as indicated in a statement released to the media yesterday: "Compaq and Microsoft recommend that their customers adopt eight-way x86 ProLiant servers and Windows NT 4.0 today, and Windows 2000 Advanced Server tomorrow because of the broad application availability."
The first servers with eight Intel Pentium III processors start shipping to customers next month, and their performance equal or exceed midrange Alpha servers.
"When Compaq bought Digital it had a window of opportunity with Alpha that is closing now with eight-way servers available, Merced coming out next year, and McKinley the year after that," said Lindy Lesperance, analyst with Technology Business Research, referring to upcoming competing processors from Intel.
Alpha will be increasingly marginalized, whether Compaq and Microsoft support Windows NT and 2000 on the platform or not, said analysts. Compaq will increase support for Linux on Alpha as well as Tru64 Unix, Compaq's version of the Unix operating system.
"Right now is a painful time for Compaq as it really reassesses where it is headed," said James Gruener, analyst with the Aberdeen Group. "This is just indicative of them making business decisions over where the company is headed over the next couple of years."