Paul:
Looks like others are jumping on board as well. The PC companies say their next target will be machines with as many as 32 Intel processors. Imagine that! 32 per box at better than average margins:
The Wall Street Journal -- August 17, 1999
Corporate Focus:
Intel and PC Allies Challenging High-End Computers
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New Machines to Boost Performance by Linking Eight Processor
Chips
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By Gary McWilliams and Dean Takahashi
Staff Reporters of The Wall Street Journal
Intel Corp. and its personal-computer allies this week begin an assault on the high-end computing market, as they launch a new breed of machines that lash together eight microprocessors to match the performance of much higher-price computers.
The PC makers hope that the products will put further pressure on the profits of companies such as Sun Microsystems Inc. and other makers of high-end RISC, or reduced instruction set computers, such as International Business Machines Corp. and Hewlett-Packard Co.
At a news conference here today, Compaq Computer Corp. kicks off the industry's marketing campaign by outlining a focus on fast-growing electronic-commerce and Internet-services customers. The Houston-based company makes no bones about its target: "The plan is to eviscerate Sun from below by offering comparable performance at one-third the cost," said Mary T. McDowell, vice-president and general manager of Compaq's Industry Standard Server division.
Rob Hall, Sun's vice president of marketing, said its rivals can't offer the same performance range or reliablity. "We designed our systems for mission-critical customers from the beginning," said Mr. Hall. The new challengers "grew up from the PC environment. So it's a different thing."
More than 20 PC makers, including Compaq, Unisys Corp., Hewlett-Packard and Dell Computer Corp., next week will begin shipping the computers, known as "eight-way servers." Previously, off-the-shelf servers could only use one to four processor chips, limiting their use to applications such as electronic mail and filing data.
"We can apply the economics of volume production and standard technologies to bring these systems in at a price point that's radically different," says Kevin Soelberg, Dell's director of server marketing.
The new machines were made possible by an Intel chip set that allows the computers to easily "scale," or deliver increased power with the addition of more processors. Supporters say the added power should enable these machines to meet the computing needs of entire divisions or companies.
The first versions of the machines are expected to cost from $20,000 to $800,000, depending on storage, chip speeds and options. A typical eight-chip server, useful for processing high-speed transactions on Web sites, will cost about $50,000. "This is aimed at a significant chunk of the RISC market," said John Miner, Intel's vice president and general manager for its communications products group.
"Up until now, the only really `scalable' systems were Unix and RISC," said Don Johnson, a Unisys vice president. "What we're doing with our eight-way and followon products is giving customers a dramatic choice." Mr. Johnson contends that a fully outfitted Unisys system priced at $750,000 can handle more business transactions than an IBM RISC-based computer priced at $3 million. Both prices include all software, storage and PCs to run a sophisticated order-entry program, according to Unisys.
Analysts say the electronic-commerce and Internet services are prime targets for the new Intel-based systems because such customers already use PC servers for billing and other ancillary services alongside their RISC machines. They may find it less costly to introduce new services on the Intel-based servers. "The cost of deploying a lot of dedicated Intel servers is going to be a lot less," said Laurie McCabe, an analyst at Summit Strategies Inc.
Now RISC suppliers, which fled to the server market from desktop workstations as Intel entered the workstation business, face the challenge of making their own technological leaps to stay ahead of Intel and its high-volume production advantages. The PC companies say their next target will be machines with as many as 32 Intel processors.
Market researcher International Data Corp. estimates sales of midrange computers, which includes most RISC and Unix machines, at $20 billion a year.
But some industry analysts argue that a wholesale move away from RISC isn't likely. While the eight-way servers should allow PC makers to win more corporate jobs, the midrange server market hasn't been a high-volume business, said Amir Ahari, IDC research manager. Indeed, customers tend to choose suppliers that can provide the service and support for their business-critical projects, rather than just provide inexpensive hardware.
Another reason is the current Windows NT operating software common for such PC servers has a ways to go to manage heavy-duty computing. Microsoft is preparing a version of its operating software, called Windows 2000 Data Center Edition, geared to such high-performance machines, but it won't be released until sometime next year. "We won't really know how these machines will perform until Windows 2000 and the Data Center Edition is available," said Brian Richardson, an analyst at Meta Group Inc.
The question for Sun and other RISC suppliers remains whether many customers will be satisfied with lower-cost machines from Intel that use eight processors at once. Sun makes servers that use as many as 64 microprocessors, but most companies don't need such power to run Web sites.
For Intel, the 600-megahertz Pentium III Xeon chips used in the chip sets cost as much as $3,000 each, compared with the typical $200 average chip price for its PC microprocessors. As such, the server chips are key to helping Intel offset the price war in the low end of the PC market.
Still, even with those prices, the Intel machines are far cheaper than competitors' machines, said Mr. Miner of Intel. The next encroachment that Intel plans to make on the high-end chip market will come with the company's long-awaited Merced chip, which is expected to be available in samples shortly and in mass production in the second half of next year. Mr. Miner said the eight-way servers aren't reliant on Microsoft's upcoming Windows 2000 operating system, mainly because the current Windows NT can support eight-processor machines.
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With Intel Chips, PC Makers Unite Against Unix Looking to snatch share from makers of Unix-based servers, PC makers are creating their own Intel chips.
New Servers are Rolled Out. . .Brand 8-Microprocessor- Chip ServersCompaq Computer Proliant and IntegrityDell PowerEdgeHewlett-Packard NetServerIBM NetfinityToshiba MagniaUnisys AquantaAnd Sales Forecasts RiseMarket share of Intel-design-based computer-servers, in billions of dollars 1999 2003Total market: %68 billion $88.8 billionIntel-design based: 21 billion 46 billionAll other servers: 47 billion 42.8 billion
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