As Intel Corp. this month marks the one-year anniversary of the debut of its first 64-bit Itanium processor, the chip maker is sharpening its aim on Sun Microsystems Inc.'s server install base, intent on toppling Sun's UltraSparc processor fortunes.
Intel's aggression toward Sun for stubbornly remaining the only non-Intel computer maker in the industry surfaced only a few weeks ago at Intel's Spring Analyst Meeting at the company's headquarters in Santa Clara, California Intel executives took open shots at Sun, charging, among other things, that Sun was losing billions of dollars to Intel because customers were choosing Intel's less-expensive commodity-grade processors over Sun's pricier, RISC-based chips.
But recent industry figures from IDC, in Framingham, Massachusetts, suggest Sun is holding its own against other server makers such as IBM, Hewlett-Packard (HP), and the once autonomous Compaq, leading the worldwide Unix server market with a 28.8 percent market share based exclusively on UltraSparc-based servers.
This has led many experts to view Intel's strong rhetoric toward Sun as a defense mechanism in troubled times.
"Intel is a lot more aggressive, but hey, times are tough, and they are trying to show that they are winning out over Sun," explained Nathan Brookwood, the principal analyst at Insight 64, in Saratoga, California.
More ominously, though, Intel's verbal attacks on Sun represent the beginning of a larger battle between the two companies, likely to be triggered by the arrival this summer of Intel's Itanium 2 chip, said Brookwood.
Itanium 2 will be the first chip from Intel's Itanium line ready to shoulder mission-critical computing tasks in application and database server environments. The original Itanium chip was generally regarded as proof-of-concept for Intel's 64-bit processor technology and was used primarily in servers porting applications to Intel's 64-bit platform.
Two concerns appear for Sun with the arrival of Itanium 2.
The first is industry momentum behind Intel chips and the Microsoft operating system, which together have been labeled "industry standards." Like Windows, Intel architecture is just now beginning to carve out a reputation for being reliable under mission-critical circumstances.
Add to that last year's move by HP and Compaq to retire their RISC chips and become an Intel shop and suddenly it appears as though Sun could be painting itself in a corner by sticking to its proprietary chips and operating system, Solaris.
But not everyone agrees that the industry is ganging up on Sun.
"I don't think Sun is painting themselves into a corner. While they continue to use their own hardware and software, I wouldn't exactly call it non-standard," said Dean McCarron, an industry analyst at Mercury research, in Scottsdale, Ariz.
"Their share in the server market -- particular Web servers -- is quite high, which sort of makes them a standard. Besides, is a proprietary OS from one vendor [Sun] really any more or less standard than one from another [Microsoft]?"
Brookwood agrees that Sun will likely fair better against Intel than the chip maker would like to admit. Sun recently announced a 2003 launch window for its top-end UltraSparc IV chip and has finally made its UltraSparc III chips available across the company's product line, fortifying its defense against Intel.
"Despite Intel's actions and words, Sun is at the beginning of a new product cycle -- UltraSparc IV -- and they finally have UltraSparc III almost top-to-bottom," said Brookwood. But he cautioned that Itanium will still be a force, even though it remains unproven prior to launch. "Anyone who looks at Merced -- the code name for the original Itanium chip -- and says Itanium is not important would be throwing out Itanium with the Merced bath water."
The second threat posed by the arrival of Itanium 2 goes directly to Sun's bottom line, said Brookwood.
When compared to UltraSparc chips running Solaris, Intel's Itanium 2 chips will be cheap. This means Sun will likely find itself lowering prices across its UltraSparc server line in the same way Sun had to discount its line UltraSparc workstations when Pentium III chips began to arrive from Intel, said Brookwood.
"Sun was selling workstations for US$15,000, and then Intel made it possible to build a $10,000 workstation, but Sun didn't respond immediately and they lost market share," he said, adding that he does not believe Sun will make the same mistake again.
Itanium's arrival will mean that Sun "will no longer be able to maintain their current price structure," Brookwood added.
McCarron also suggested following the money. "As long as Sun can afford to fund the CPU (central processing unit) design teams and manufacture their own systems profitably, they can continue on their existing hardware path," he said.
Supplementing lost hardware revenue with software and IT services will help Sun as it faces price cuts in its hardware line following the arrival of Itanium 2.
But Sun's strategy here will be no different than the plans of Intel server vendors who must also cope with the continually falling margins of Intel products, said McCarron.