Hewlett-Packard is ending its design work on the 64-bit Itanium processor, announcing Thursday that Intel has agreed to hire HP's Colorado-based Itanium design team.
HP began working with Intel more than a decade ago to develop the chip, which has been available in HP servers since 2001. Despite grand expectations, Itanium was slow to take off because of performance problems and high costs, but analysts say Itanium's third generation -- Itanium 2, released in 2003 -- is a greatly improved processor.
By ending its Itanium chip design work, HP is saying that it believes Itanium has matured to the point where its input is no longer necessary at the processor-level, analyst say.
Intel, on the other hand, is strengthening its commitment to continue to advance Itanium, including work on multicore and multithreaded designs. A dual-core Itanium processor is slated for release next year.
"HP no longer needs to focus on the chip level and can focus more on systems," says Martin Reynolds, a Gartner fellow. "It's a sensible maturation of the development process."
In announcing the shift of developers to Intel, HP also stressed its continued commitment to Itanium. It said that it would invest more than US$3 billion over the next three years in its Itanium 2-based Integrity servers, which compete in the $20 billion RISC server market.
The investment will go towards research and development, server and system software design, ISV offerings and sales and marketing, HP said.
By handing off the design team HP will see a cost reduction of $40 million to $50 million a year, Reynolds says.
"It's really a small impact," he adds. "It's still business as usual."
In the fourth quarter, sales of HP's Itanium-based Integrity servers accounted for 16 percent of the company's high-end server revenue, up from 5 percent a year ago. The company expects Itanium-based servers to make up more than half of high-end server sales by the end of next year and 70 percent by the end of 2006.