Intel aims Itanium 2 at high-end server market

Intel Corp. launched the second version of its Itanium processor today, trying once more to carve out a business for itself in the lucrative market for high-end workstations and servers.

At least 20 vendors will offer Itanium 2 systems in the coming weeks and months, including Hewlett-Packard Co., IBM, Unisys Corp. and Fujitsu Siemens Computers (Holding) BV, Intel officials said. Operating systems including Microsoft Corp.'s Windows, HP's HP-UX and Red Hat Inc.'s Linux are also being rolled out, along with enterprise software products from Oracle Corp., BEA Systems Inc., SAP AG and others.

But cracking the high-end server market, where RISC chips from Sun Microsystems Inc., IBM and others hold sway, won't be an easy task. Business customers in particular are wary of new technologies and need to be convinced that the systems and software are reliable enough to run their critical applications, analysts said.

Because of that and because many of the systems and software products will be rolled out gradually in the coming months, analysts predicted a gradual uptake for the new chip.

"The primary issue is having something that's stable and trusted," said Dean McCarron, president of Mercury Research Inc. in Scottsdale, Ariz.

Intel's first 64-bit chip, launched in May last year (see story), for the most part failed to impress. It was released behind schedule, its performance was lacking, and systems and software on offer were too new to inspire confidence among end users, analysts said. Moreover, server vendors were wary of designing servers around an architecture that was expected to change a year later with the release of the current chip.

The Itanium 2 looks more promising, said analysts. Thanks to several design improvements, it should perform as much as 50% to 100% better than its predecessor, according to Intel test results, although those have yet to be verified independently. Intel applied the lessons it learned with the first chip and, "as a result, Itanium 2 is a significant improvement," McCarron said.

The software also has had time to mature, said Nathan Brookwood, an analyst at Insight 64 in Saratoga, Calif. Vendors including Microsoft, IBM, Oracle and SAP offered versions of their software that ran on the first Itanium and have had a year to improve the performance and stability of those products, other analysts said.

Nevertheless, "this is not like shooting fish in a barrel," Brookwood said. Because the chip is new, Intel needs to demonstrate that systems based on Itanium 2 can offer the performance, reliability and scalability that customers demand from servers that are priced from $20,000 to $1 million or more, he said, adding that "in theory they do, but they need to get some customers out there using these products and then circulate the success stories."

Some Intel partners were enthusiastic. Microsoft sees Itanium 2 as key to its own efforts to reach into higher-end markets with its products, said Velle Kolde, lead product manager for Windows Enterprise Servers at Microsoft. Later this month, the software maker will release Windows Advanced Server Limited Edition 2.1, which is tuned for the new chip, he said. And later this year, Microsoft plans to release two versions of Windows .Net for Itanium 2 -- one of which will run on up to 64 processors and support up to 128GB of addressable memory.

"We're very excited about [Itanium 2]," Kolde said. "Up until a year or a year and a half ago, we never had more than eight-processor [Windows] systems. This will allow us to extend the capabilities of Windows and reach into that higher-end computing market. Up to this point, we really haven't had a platform with which we and our partners could compete in that space."

Other vendors expressed confidence in Itanium 2 but don't expect a fast payback from their investment.

The 64-bit version of Windows .Net "is what everybody is waiting on," said Frank Reichart, director of Intel server marketing at Fujitsu Siemens Computers, which will offer a 16-way Itanium 2 server. Since the Microsoft software won't be available until the end of the year, "the majority of software vendors will not be out with applications until mid-2003, and I don't see the Itanium 2 market take-up until then," he said. "We are releasing systems earlier so larger organizations can evaluate them."

The market for Itanium 2 systems "will be a small market in 2003, with some potential in 2004," Reichart said.

Indeed, some customers may wait for the next version of Itanium, code-named Madison, which is due in mid-2003, said Kevin Krewell, general manager at In-Stat/MDR in San Jose. That chip will offer further performance enhancements, including a 6MB memory cache, double that of Itanium 2, Intel has said.

"A fair number of people may wait for Madison," Krewell said. "IT budgets are really tight this year. It's hard to rationalize how the IT world would go out and purchase a new architecture and new software until a time that it's so compelling they need to make the change."

The stakes are high for Intel. Almost nine out of 10 servers sold today use Intel processors, according to research company IDC in Framingham, Mass. But those systems account for only about 40% of server revenue, because RISC-based servers such as those made by IBM, Sun and HP tend to command higher prices. Intel hopes to snatch a piece of that higher-end business away from its rivals.

Among key improvements, the chip features a large memory cache of up to 3MB, which is tightly integrated with the main processor, along with a faster system bus that increases data throughput from 2.1G bit/sec. with the first chip to 6.4G bit/sec. with its successor. Those enhancements should boost the performance of large databases, business intelligence software, enterprise resource planning applications, engineering design programs and other software, said Mike Graf, Intel's product line manager for Itanium 2.

The chip was launched in three versions: a 1-GHz chip with 3MB of Level 3 cache for a list price of $4,226; a 1-GHz chip with 1.5MB of Level 3 cache, priced at $2,247; and a 900-MHz chip with 1.5MB of Level 3 cache, priced at $1,338. Those prices are similar to those of the first Itanium and are the going price for this kind of chip, according to Brookwood.

HP, which is one of Itanium 2's biggest backers, has already tuned a version of its HP-UX operating system for the chip and will offer a server with two Itanium 2 processors and up to 12GB of memory priced from $6,730. A system with four processors and 48GB of memory will be launched in August, starting at $21,000, HP officials said.

The price/performance combination offered by Itanium 2 servers, particularly in four- and eight-processor systems, will put pressure on RISC server vendors, and particularly Sun, which has no plans to offer Itanium 2 systems of its own.

"It will in the long run be Sun's worst nightmare, but that's not something that plays out over the next six months," Brookwood said. "It begins to play out over the next 18 months. And in five years, unless Sun makes some substantial changes in its strategy, it's going to be a big problem for them."

Sun maintains that it will take years for Intel-based servers years to become as scalable and reliable as its own Unix servers, which come packaged with an array of management and administration software. And, like IBM, Sun has cut prices on some of its own Unix servers to compete more effectively.

Support for Itanium 2 wasn't unanimous: A spokesman for Dell Computer Corp. said the company has no immediate plans to offer an Itanium 2 server and will wait to see how demand for the systems shapes up from customers (see story).

Dell's specialty is to sell relatively low-cost systems in large numbers, whereas Itanium 2 is aimed at more expensive servers that will sell in lower numbers, said McCarron at Mercury Research. So while Dell may be the world's largest server vendor, its absence from the ranks of Itanium supporters is seen as a symbolic setback for Intel, he said.

"In this computing space, the volumes are relatively small and development times are quite long, so I wouldn't expect the absence or presence of any one vendor to dictate how Itanium 2 is going to fare," McCarron said.

Martyn Williams, Peter Sayer, John Blau, Ashlee Vance, Laura Rohde and Matt Berger, all of the IDG News Service, contributed to this report.

Copyright © 2002 IDG Communications, Inc.

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