Intel Xeon chip to boost profits

Xeon will be the name for the family of sophisticated corporate processors coming this summer from Intel, the company announced today, introducing the second phase of a branding strategy the chip giant is executing this year.

Xeon, however, represents more than just another fancy galactic name. The upcoming workstation and server processors, which will be based around the Pentium II core, will likely be a linchpin in Intel's future business strategy.

With desktop chip prices declining, the company will increasingly look to more powerful processors from the Xeon family as well as succeeding generations to maintain its high profit margins. These families include chips incorporating the next generation of MMX multimedia and 3D graphics technology (dubbed Katmai), the 32-bit Tanner processor that will also work with 64-bit machines, and 64-bit Merced and McKinley processors.

Unlike desktop chips, which now sell for between $100 and $800 in quantities, Xeon chips will start at a whopping $2,000, allowing Intel to reap larger gross margins, according to various analysts.

For Intel, "the dollar growth is in workstations" and servers, according to Nathan Brookwood, semiconductor analyst for Dataquest. Merced, Intel's first 64-bit processor for servers and workstations, will appear in 1999 while McKinley is due in 2001, said sources.

The Xeon chips, which are expected to be available in volume in the third quarter, essentially expand the features of current Pentium II processors. Xeon chips, for instance, will be based around a "Slot 2" design, a larger version of the Pentium II chip package that has increased in size to accommodate, among other features, greater amounts of the extra high-speed memory referred to as "secondary cache." Cache memory can speed up performance dramatically.

Xeon processors will be available with 512 kilobytes, 1MB, or 2MB of secondary cache memory, said Mike Fister, vice president of manufacturing and product development for the microprocessor group at Intel, earlier this year. Price will vary with the amount of cache memory included, he said.

Today, Slot 1 Pentium II chip packages only hold about one-fourth as much data as the high-end 2MB cache chips.

In an important first for Intel, Xeon-based servers will be capable of using as many as eight processors at once, according to company spokesman Seth Walker. Current Pentium II computers can only use two processors at most in standard designs. Since server and workstation vendors will be able to incorporate eight Xeon processors using standard hardware architecture, this is expected to drive down high-end server prices.

This new architecture will also give Intel the opportunity to penetrate deeper into the high-end corporate "enterprise" computing market now dominated by Unix server makers such as Sun Microsystems and Hewlett-Packard, as well as mainframe manufacturers.

These advances aside, the first generation of Xeon chips will be only as fast as the Pentium II desktop chips. The first versions of the chip will run at 400 MHz with a 100-MHz system bus while a 450-MHz version will come out later, an Intel spokesman said. The company released 400-MHz Pentium IIs for desktops last week, and a 450-MHz version is due in the second half of the year.

Most major vendors are expected to pledge support to Xeon. IBM, in fact, last week rolled out servers based around the latest Pentium II processors that can accommodate Xeon chips.

The name "Xeon" was created by Lexicon, a branding consultancy in Sausalito, California. The name has no inherent or etymological meaning, but is supposed to connote speed, said David Placek, president of Lexicon.

"It starts off with that very distinctive 'X.' The 'P' in Pentium is pretty deliberate and the 'X' is even more so," he said. "The 'X,' which is pronounced 'zz,' is the fastest-sounding letter there is in several languages. With the last three letters, we try to balance that speed with a little smoothness."

Other companies, including Xerox and Exxon, have used the zz sound with great effect, he said. Placek denied any connection to the popular TV series Xena: Warrior Princess.

Earlier this year, Intel announced that its low-end processors would be named "Celeron." The brand name, also from Lexicon, derives from the Latin root for speed.

Intel is an investor in CNET: The Computer Network.