Dell drops plan to sell Unisys server

The move is the third major setback to Unisys' plan to spread its cellular multiprocessing (CMP) server as widely as possible. The company had made some progress in its goal to make CMP systems a standard item on the product lists of those who sold Intel servers, but Dell now joins Compaq Computer and Hewlett-Packard in ditching CMP plans.

"We canceled that product and do not have plans to bring that to market," Dell spokesman Bruce Anderson said of the 32-processor system. When the deal was announced, in December 2000, Dell executives bragged that the new system "extends our whole portfolio of products to the most demanding application arena, like high-end databases, transaction-processing, e-commerce applications," but the sour economy, Anderson said, forced a change of plans.

"It's not as bad as it sounds," Unisys' Marty Krempasky, communications director, said Monday of Dell's decision. For one thing, he said, the two companies still have partnerships, with Unisys selling services to Dell clients and also selling lower-end Dell servers. For another, the companies expect to announce a new cooperative agreement in coming weeks "to make sure Dell clients...get the opportunity to buy this box."

The move comes just as Unisys revamps the CMP systems, which it sells under the ES7000 name, with the latest Xeon processors from Intel. With the new CPUs, Unisys gets a speed boost from older 900MHz Pentium III Xeons to 1.4GHz and 1.6GHz Xeon MP chips, which are based on the Pentium 4 design. Intel is debuting the Xeons this week at the CeBit trade show in Germany.

One of the chief selling points of the ES7000 line is the ability to divide the servers into several four-processor "partitions," each with its own operating system. This feature has generally been available only in Unix servers and mainframes.

IBM will debut its first version of hardware partitioning in Intel servers Wednesday with the debut of "Vigil," an eight-CPU system that can be split into two four-CPU partitions. Ultimately, IBM plans to use the Enterprise X Architecture "Summit" technology of Vigil in 32-processor systems.

Unisys descended from royalty in the business-computing world, but hasn't lived up to its pedigree.

The Blue Bell, Pa.-based company was the result of the 1986 merger of mainframe makers Sperry Rand and Burroughs. Sperry had merged in 1955 with Remington Rand, who employed the makers of the pioneering ENIAC and UNIVAC computers.

Sperry-Burroughs touted their merger as "the power of two," a reference to exponential growth, but the difficulties and plunging stock price led wags to deride it as "the power of two and five-eighths," said Illuminata analyst Jonathan Eunice.

Today, hardware has waned in importance at Unisys. IBM dominates the mainframe market, and in 2001, 74 percent of Unisys' revenue came from services. Though the company remained profitable through the recent spending downturn, profit margins have been hurt "by continued industry weakness in high-end servers and in systems integration and consulting," Unisys said in January.

Hammered by the economic slowdown, Unisys' net income of $225 million in 2000 dropped to a net loss of $67 million in 2001.

A focus on direct sales
Unisys had hoped the more successful Intel server sellers such as Compaq and Dell would carry the load selling the CMP systems, but the company now is concentrating chiefly on direct sales with a boost from smaller sales partners such as Fujitsu services subsidiary ICL and Hitachi, Krempasky said.

Compaq announced its plan to sell the CMP systems two years ago, and HP followed suit in September 2000. The deals fell through in spring 2001.

But Unisys still got some mileage out of the sales deals with HP and Compaq, said Chas Weber, director of business development at Unisys, in an earlier interview. "The advantage to doing it, even if they dropped out, was a lot of market exposure," he said.

The ES7000 servers have commonly been selling for $480,000 with an average of 22 processors, Weber said. About 600 CMP systems have been sold so far, Krempasky said.

Unisys isn't the only one with hopes riding on the CMP systems. Microsoft also is banking on the products to help carry Windows into high-end environments where Unix and mainframes currently prevail leaving Windows to play only a supporting role.

Windows currently is most often used on lower-end systems with four or fewer CPUs. That's where Dell's server line and customer base is strongest.

The CMP system arrived in the nick of time for Microsoft's Windows 2000 version, its top-end operating system designed to run on servers with as many as 32 CPUs.

Unisys and Microsoft are working to market and improve each other's products. Gradually, they're making progress, said Mark Feverston, vice president of Unisys server programs. Initially, systems typically were sold with 16 processors divided into two eight-CPU partitions, but now "we're starting to see more single 16-way partitions," he said.

And the city of Minneapolis is even running Windows in a single 32-CPU partition.

Though the new Xeon chips come with Intel's "hyper-threading" feature, which lets a single chip act somewhat like two, that feature won't be enabled initially, Feverston said.

The new ES7000/200 systems run about 20 percent faster than the older models, but Unisys is keeping the price the same. The CMP systems cost anywhere from about $100,000 to $1 million, Feverston said.