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Itanium seen trailing rivals in 2007

Although the sale of servers based on Intel's Itanium chips will grow, those systems will still lag behind IBM and Sun, one research firm says.

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.
Michael Kanellos
3 min read
Sales of servers based around Intel's Itanium chips will grow, but they will still lag behind today's established leaders five years from now, according to research firm Gartner.

By 2007, yearly revenue from servers running Itanium processors, a 64-bit family of chips for high-end servers that typically run four or more processors, will come to approximately $4 billion, according to Gartner analyst Jeff Hewitt.

By contrast, servers running UltraSparc, the competing chip family from Sun Microsystems, will account for $6.6 billion. Revenue from IBM machines using the Power processor will total $8.6 billion, Hewitt said.

Although it may be third in 64-bit servers, Intel is expected to wield increasing influence through the sale of its processors for smaller machines. The rising popularity of its 32-bit server chips, which are essentially beefed up versions of the processors found in desktops and notebooks, will account for $27 billion in sales in 2007, Hewitt projects.

The projections underscore current shifts in the server world. IBM, which has latched onto Linux and unveiled an ambitious processor strategy for its server and mainframe line, continues to inch up in terms of market share. The company accounted for 29.6 percent of worldwide server revenue in the second quarter, making it the largest company in terms of revenue, Gartner said.

Servers containing AIX, IBM's version of Unix, will likely pass sales of servers from Hewlett-Packard running HP-UX by late this year or early next year, Hewitt said. Sun, meanwhile, has recovered to some degree from the extreme dip it experienced in 2001.

Itanium, though, has yet to completely find its footing. Only 722 servers containing Itanium or Itanium 2 processors were shipped in the second quarter.

"That's about $17 million in business," Hewitt said, a small portion of the overall market.

Last year, 2,716 Itanium servers were shipped, but the total figure included two 1,000-server clusters, Hewitt said.

Looking for a spark
Part of Itanium's gradual growth can be attributed to the glacial nature of the market. Customers are loath to try out new big-iron machines, especially now with tightening IT budgets, several analysts and executives have said.

"I don't think there will be any significant volume until Madison and Deerfield next year," said Kevin Krewell, senior editor of Microprocessor Report, an industry newsletter. Madison and Deerfield are code names for future versions of Itanium set to arrive in 2003. In earlier years, McKinley, the code name of the chip that became Itanium 2, was expected to kick off volume sales.

An Intel spokeswoman declined to comment on the figures or projections for Itanium sales, but acknowledged that gaining acceptance will be a long process.

"We're happy with the ramp we've got going," she said. "It is a slow and steady gain."

At the same time, Itanium has been subject to the political forces of the hardware market. HP, the co-developer of the chip and one of its biggest boosters, is still grappling with its just-completed merger with Compaq Computer. Dell Computer, which is quick to adopt Intel chips, has scaled back its overall Itanium efforts and has not committed to new Itanium 2 products.

"Dell is the linchpin of this thing," Krewell said.

Despite its sheepishness about Itanium, Dell will be crucial to Intel's push in the low end of the server market. Dell barely gained market share, in terms of revenue, in the second quarter. Yet the figure is slightly deceiving, Hewitt said, as smaller servers continue to gain popularity at the expense of the larger, more complex machines.

"When you look at the broad picture, Dell continues to chip away," he said.