Dell to skip Itanium 2 for now

The PC and server powerhouse takes a "wait-and-see" attitude on Intel's high-end server chip--a move that could embarrass the chip giant.

Michael Kanellos
Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
3 min read
A number of server and software manufacturers will tout new products based around Intel's Itanium 2 processor when the chip is released next week, but Dell Computer won't be among them.

The Round Rock, Texas-based PC manufacturer has no definite plans for Itanium 2 servers and will not be on hand when Intel unveils the chip, said a company representative.

"At this point, we are in a bit of a wait-and-see mode with Itanium 2," the representative said.

The absence of Dell will likely be awkward for Santa Clara, Calif.-based Intel. Dell is the largest PC manufacturer in the world and is a growing presence in the server market.

In terms of revenue, Dell was the fifth-largest server maker worldwide in the first quarter of 2002, commanding 8 percent of sales, according to research firm IDC. And in terms of units, Dell was the No. 2 server maker in the world during the first quarter, with 17.8 percent of the market, according to research firm Gartner.

Dell is also one of the few companies growing its market share. In the first quarter, Dell saw its market share rise 14.2 percent while most major manufacturers saw their market shares shrink.

"It is going to be a bit embarrassing for Intel," said Kevin Krewell, an analyst with Microprocessor Report, an influential semiconductor newsletter.

Next week Intel will launch the Itanium 2, a complex server chip designed to fit into servers that will compete against the most expensive machines from Sun Microsystems and IBM.

Hewlett-Packard, IBM, Fujitsu, Microsoft and several Linux companies will launch products or discuss their plans for Itanium 2 next week, according to sources, while Intel will show off benchmarks intended to demonstrate that these new servers outperform similar Sun boxes and cost less.

"We will have more OEMs (original equipment manufacturers) and more models with Itanium 2 than with Itanium," said an Intel representative.

Dell's reluctance comes down to demand. The company is still in the process of gauging how popular the chip will be with customers, the representative said. Unlike other Intel chips, the Itanium family requires completely new software, and the software is just being made now. The first Itanium chip, released in May 2001 after several delays, has sold poorly, owing in part to lackluster performance, a declining economy and an absence of software.

Intel and many of its server partners assert that the experience with Itanium 2 will be different. Intel improved the overall design of the chip and has been working actively with software developers to port applications and operating systems to Itanium 2, which once went by the code-name McKinley.

Itanium, though, also doesn't fit Dell's business model well. Dell prefers to concentrate on high-volume products and doesn't dedicate massive amounts of resources to independent research and development. Itanium 2 will largely be found in servers containing four to 16 processors--not a huge market in terms of units.

Itanium 2 servers also generally require intensive design work. Both IBM and HP are using their own chipsets in their respective Itanium 2 servers. Intel, though, will try to cut some of the design burden for smaller manufacturers by making Itanium 2 servers that they can sell under their own brand names.

"It is an admission by Dell that the Itanium 2 family doesn't have the value needed for the Dell model," Krewell said. Krewell also said, "McKinley is nice, but any volume is a year out."

Dell's relationship with Intel over Itanium has always been a bit rocky. Dell came out with an Itanium workstation last year but then unceremoniously discontinued it after a few months.

Last November, Joe Marengi, senior vice president and general manager, Dell Americas, said that demand for the original Itanium was "effectively zero" and that software developers had little incentive to port their applications to the chip.

Dell has also been performing tests on Hammer, the server chip coming from Advanced Micro Devices next year, according to sources at Dell and AMD. Chief Executive Michael Dell and AMD Chairman Jerry Sanders also engaged in a public display of good-natured backslapping earlier this year at Merrill Lynch's Hardware Heaven conference. Dell, however, has tested AMD technology for years and never adopted it.

Although it has no plans for Itanium 2, Dell will continue to sell the PowerEdge 7150 server, which contains plain Itanium processors.