Transmeta's chips charge into servers
By Justin Hibbard
Redherring.com, January 12, 2001
Last year, when Transmeta (Nasdaq: TMTA) introduced itself to the world as a new chip maker for mobile computers, Intel (Nasdaq: INTC) yawned. After all, Webpads and ultrathin notebooks account for a sliver of the microprocessor giant's earnings. Little did Intel know that Transmeta was quietly gunning for a chunk of its prime real estate: the server market.
This year, at least four companies will release servers based on Transmeta's Crusoe processors. These aren't upright tower servers; they are slim, pizza box-shaped units designed to be stacked in racks. Rack servers formed the fastest-growing segment of the Intel-based server market last year, according to the market research firm IDC. Their main requirements are low power and low heat, which just happen to be Crusoe's strong suits.
The companies that make Crusoe-based servers aren't exactly household names: RLX Technologies, Amphus, FiberCycle Networks, and Rebel.com. But these up-and-comers aim to out-innovate larger, slower competitors in a ballooning new product category.
From first to third quarter 2000, rack servers grew from 13 to 25 percent of all Intel-based servers shipped, IDC reports. In real numbers, that's a jump from 108,000 units to 243,000 -- a 125 percent gain. By 2004, IDC predicts, rack servers will make up more than half the Intel-based server market.
PLEASURE TO SERVE YOU
Who's buying all this hardware? As Web traffic grows, popular sites like Yahoo (Nasdaq: YHOO) and America Online (NYSE: AOL) keep filling data centers with more servers. Some sites host their own machines, but most of them lease space and equipment from outsourcers like Exodus Communications (Nasdaq: EXDS) and Digex (Nasdaq: DIGX). Either way, every square foot costs money. Rack servers can cut costs by packing lots of computing power into little space.
A space crunch in data centers worldwide is fueling demand for so-called dense servers, which are designed to squeeze as many processors into as small a box as possible. The densest Intel-based machines from companies like Dell Computer (Nasdaq: DELL), Compaq Computer (NYSE: CPQ), and VA Linux Systems (Nasdaq: LNUX) cram two Pentiums into one unit of rack space (about 1.7-by-17.6-by-22 inches). Because standard six-foot racks contain 42 units, that's a total of 84 chips per rack.
To beat that density, makers of Crusoe-based servers are exploiting a server design called a blade. A blade is a card about the size of a paperback book on which nearly all the components of a server -- memory, processors, hard drives, et cetera -- are mounted. Multiple blades can plug into the back of a rack server that's just a few units high, letting users add computing power as needed without leasing more square feet.
A rack full of RLX Technologies' servers, each holding up to 28 blades, will contain nine times as many chips as a rack full of one-unit-high dual Pentium servers. "We see an opportunity here to redefine server economics," says RLX CEO Gary Stimac.
HOT HARDWARE
Why don't Dell and Compaq cram more Pentiums into their boxes? The chips generate so much heat that adding more could bake the computers from inside. Processors get hot when they consume lots of electricity. Hence low-power chips like Transmeta's Crusoe are well suited for dense servers. What's more, they can potentially slash a data center's electricity bill.
Last year, Intel bought Ziatech, a company that makes Pentium-based rack servers that use blades. Ziatech says its design cuts power consumption to half of what's used by comparable Pentium-based machines.
Nevertheless, Transmeta says power consumption is Intel's Achilles heel. Since the '70s, Intel has added more transistors to every processor it has released, making each chip more power-hungry than its predecessor. The Pentium 4, introduced last year, burns up to 60 watts. Because Transmeta has built much of its processor in software, its chip contains few transistors. When running multimedia applications, the TM5400 Crusoe processor consumes about one to two watts.
But the all-important test of a dense server is performance per watt per square foot. At 700 MHz, the fastest Crusoe still lags behind Intel's Pentium III, which runs at 1.13 GHz. However, Crusoe's low heat lets manufacturers stuff more chips in a box. RLX Technologies claims that two 550-MHz Crusoes can serve more Web pages per second for less power, space, and money than one 1-GHz Pentium.
But that's just Web serving. Complex applications like databases need several processors joined through a technique called symmetrical multiprocessing. Crusoe chips aren't built for that use. So server makers are putting them only in boxes made for lightweight tasks.
That's one reason servers will make up less than 5 percent of Transmeta's sales this year, according to the investment bank Pacific Growth Equities. Another is the size of Transmeta's customers. To move big volumes of server chips, Transmeta would need top sellers like Dell and Compaq to put Crusoe in their servers -- unlikely, because that would risk angering a key supplier, Intel.
But their reluctance creates an opportunity for startups like FiberCycle Networks, which can afford to take a chance on Crusoe. And if Dell or Compaq wanted to buy that startup? Says FiberCycle's CEO and president, Spero Koulouras, "That wouldn't be a bad thing."
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