HP ANNIVERSARY - Jury still out on HP's Itanium server bet

Hewlett-Packard (HP) faces an overhaul in its high-end servers that analysts say could be a big factor in determining whether the acquisition of Compaq Computer is a success.

Both pre-acquisition HP and Compaq decided to abandon their own server chip architectures in favor of Intel Corp.'s fledgling Itanium processor. Now that the companies are united, they must work to move a massive installed base of PA-RISC and Alpha chip users to the new platform from Intel. This technology shift is made more daunting by a down economy, and HP has a long way to go before its Itanium bet pays off, according to some industry analysts.

"I continue to question the efficacy of their high-end server strategy," said Ed Broderick, principal analyst at the Robert Frances Group, based in Wappingers Falls, New York. "I am concerned about continuing problems and delays in rolling out Itanium ... for its traction in the marketplace."

The Itanium processor will be HP's answer for high-end, 64-bit computing, as it phases out the PA-RISC and Alpha chips over the next two years. Offloading chip design costs to Intel, in theory, will help it in the long run even though Itanium requires large amounts of software tuning up front.

HP is counting on Itanium to do for the high end what Intel's Xeon server processor has done for low-end systems, and to become a near commodity-priced processor. For years, the company has said that the move to Itanium is a key to its future.

"In a very real sense, HP has moved the company behind (Itanium)," said former Chief Technology Officer Richard DeMillo two years ago at the HP World conference. "I would hesitate to say we bet the company on it, but if truth be told, we have put a huge bet behind (Itanium)."

But the big bet is going up against skepticism from both analysts and users who say now is not the right time to ask users to switch high-end chips.

"It's a really tough market right now not only to sell into but especially to introduce a new platform into," said Charles King, senior analyst at Sageza Group Inc. in Mountain View, California.

King noted that Itanium's take-off may also be slowed, ironically, as a result of the Compaq acquisition. Having the two biggest Itanium supporters combined into one company could help IBM Corp. and Sun Microsystems Inc. gain user mindshare.

"It's a small club producing Itanium servers," King said. "By reducing two large members into one, you have at least the public sense that only one major company is actively supporting Itanium."

Lackluster support for the Itanium 2 chip from Dell Computer Corp. and IBM Corp., which have yet to release servers with the processor, doesn't help HP's situation, King said.

Users are also wary of taking on a new chip now given the performance of PA-RISC and Alpha.

Longtime HP user Kees denHartigh has put in extensive time working with the Linux operating system running on Itanium and likes the potential benefits of the chip but is concerned about its role as a PA-RISC replacement.

"I can see why they would want to focus on Itanium," said denHartigh, systems analyst at the University of Alberta in Edmonton. "It's cheaper to produce with help from someone else, but putting all your eggs in one basket is a dangerous thing to do. PA-RISC is still a very powerful chip and a lot of people have a vested interest in it."

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