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New Servers to Come from Sun Microsystems

Posted on: Tuesday, 10 February 2004, 06:00 CST

Feb. 10--Sun Microsystems is expected to announce today new computers key to its turnaround, including high-performance servers that use the next generation of its UltraSparc IV chips as well as lower-cost servers based on chips from Advanced Micro Devices.

The Santa Clara company is releasing these new systems as it emerges from the shadows of the technology downturn. Sun still is losing money, but it has cut its rate of losses and appears to be benefiting from an industrywide recovery. But it remains unclear how well Sun's latest servers will be received by customers.

"I don't know if Sun is out of the woods yet," said Jeffrey Hewitt, principal analyst at market research firm Gartner. "Customers seem to be ready to upgrade, but it's early."

Both the high-end and low-end servers represent Sun's answer to Intel's powerful but pricey 64-bit Itanium chip. The Itanium is used in computer servers that manage big corporate databases and back-office operations. When Itanium's triumph appeared inevitable, critics ridiculed Sun for spending $200 million a year developing its own high-end chip.

But Itanium has captured only 1 percent of server sales, far short of Intel's goals. That has left an opening for Sun's own high-end chips.

Sun argues that its newly developed "throughput computing" technology, where UltraSparc chips process two different programs independently at the same time, will give the company a strategic advantage over Itanium.

Sun will release its first servers that use throughput computing as early as March. Intel has developed a similar technology dubbed hyperthreading, but Sun plans to make much more use of it in future processors, with a single chip running as many as 32 threads.

Low-end market At the lower end of the market, Sun executives say that by embracing AMD's Opteron chip, the company has anticipated customers' preference for cheaper and more versatile microprocessors. The Opteron is AMD's 32-bit server chip that offers 64-bit capabilities, meaning it has the ability to crunch data twice as fast as conventional chips. Customers who have balked at the expense of shifting to Itanium are finding Opteron easier to swallow because Opteron-powered servers can run older software fast and still can perform some of the tasks that Itanium excels at.

"Analysts on Wall Street told us that if you didn't waste so much money on R&D then sales would be better and the stock would be up," said Larry Armstrong, senior vice president of global market strategies at Sun. "Now the payoff on that R&D is starting this quarter" with the launch of the new Opteron and UltraSparc products.

IBM was the first major server company to begin deploying Opteron servers. Hewlett-Packard has lagged behind because of its staunch support for Itanium, which it co-developed with Intel.

Still, Palo Alto-based HP has acknowledged that it is considering selling servers that use chips such as the Opteron. Said Peter Blackmore, HP executive vice president: "Sun is tremendously vulnerable in both the high end and the low end."

The first Sun Opteron server, starting at $2,795, has just one or two chips, much like IBM's. But Sun executives said the company also is working on a beefier system that uses up to eight chips.

"Sun made a good call in backing the Opteron early," said Gordon Haff, an analyst at Illuminata, a market research firm in Nashua, N.H. "But now they have to execute on that good call."

Toni Sacconaghi, an analyst at Sanford C. Bernstein in New York, wrote in a report issued Monday that Sun's Opteron offerings might cannibalize sales from its UltraSparc products. He noted that, after several quarters of trying, Sun has only about half a percent of the Intel-compatible server market.

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(c) 2004, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News.

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