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Sun servers heading back to Intel chips

CEOs from Sun Microsystems and Intel are expected to announce partnership to build Xeon-based servers this year.

Sun Microsystems is expected to resume using Intel's Xeon processors in its x86 servers, according to sources familiar with the situation.

Jonathan Schwartz and Paul Otellini, the chief executives of Sun and Intel, respectively, are expected to share the stage in San Francisco on Monday to announce a broad partnership between the two companies.

The first servers from the partnership will begin arriving soon--in the first half of 2007--and Sun also will sell Xeon-based workstations, sources said.

In addition, Otellini plans to endorse the x86 version of Sun's Solaris operating system, elevating it to the mainstream status enjoyed by Windows and Linux. That means the chipmaker will devote engineering resources to validate the software and help with hardware support such as support for chip power management.

In addition, Intel will get rights to sell Solaris, sources said. Although Intel does have a significant business selling generic "whitebox" servers and components to business partners, the company doesn't currently sell operating systems or have plans to do so.

Intel and Sun representatives declined to comment on their plans.

Banc of America Securities analyst Sumit Dhanda in a report Friday, and The Wall Street Journal reported on its Web site Sunday that the deal was expected as soon as Monday.

Sun pushed Intel out of its x86 server line in favor of Advanced Micro Devices' Opteron in early 2005, saying Intel's chips were slower and more power-hungry, but Intel's new dual-core Xeon 5100 "Woodcrest" and quad-core Xeon 5300 "Clovertown" processors have restored competitiveness, and Intel has been recovering some market share lost to AMD.

The partnership signals "a shift in momentum in favor of Intel," Banc of America's Dhanda said. "While the impact to Intel financials is not meaningful in the near term, we think the shift away from AMD bodes well for momentum in Intel's server business over the course of the upcoming quarters." Dhanda estimated Intel-based servers would account for 25 percent to 50 percent of Sun's x86 server sales in 2008.

Sun is expected to continue to sell servers using AMD's Opteron and Sun's own Sparc processors.

The companies are expected to announce the deal at a news conference at 10 a.m. Monday at the St. Regis Hotel in San Francisco, sources said.

Sun's change of heart reflects the competitiveness of the x86 server market. The Santa Clara, Calif.-based company's move comes just months after Dell moved the opposite direction, adding AMD to a previously Intel-only line, and IBM launched its first full-fledged AMD server line.

After years selling servers using only its own Sparc processors, Sun began its initially lukewarm push into the x86 server market with the Intel-based LX50 systems in 2002. However, Sun's more serious "Galaxy" x86 models relied on AMD's Opteron beginning in 2005.

Sun has never ruled out a return to Intel processors, and there have been indications they were working together. For example, Andy Bechtolsheim, Sun's top x86 server designer, made an appearance at the Intel Developer Forum in September.

Also at the news conference, Intel is expected to endorse Sun's Java software and its NetBeans programming tools. Solaris, Java and NetBeans all are open-source software projects.