Intel, HP Launch New Processor

P A L O A L T O, Calif., May 30, 2001 -- After nearly a decade of development and two years of delays, Intel Corp. and Hewlett-Packard Co. launched the first in a new generation of microprocessors they hope will dominate the next era of computing.

The Itanium processor, developed by both companies, is designed for workstations and servers — machines that power Web sites, sift through data and run scientific applications.

As prices in its core PC business slide, Intel hopes Itanium will capture a slice of the high-end server and workstation market dominated by Sun Microsystems Inc. and International Business Machines Corp.“This launch is not just important to us, it’s critical,” said Paul Otellini, executive vice president and general manager of Intel’s Architecture Group on Tuesday.

Powerful But Pricey Processors

In a launch subdued in comparison to desktop processor introductions, Intel and Hewlett-Packard officials unveiled HP’s first broadly available Itanium machines Tuesday. Prices start at $7,000.

Dell, Compaq, IBM, Silicon Graphics Inc. also announced their first Itanium-based systems. All are expected to be available in June. In all, 25 computer makers are expected to offer more than 35 models this year.

The chips, which range in price from $1,177 to $4,227, are available at speeds of 733 megahertz and 800 MHz.

Better Chips in the Pipeline

Some analysts, however, do not expect strong demand for machines based on the processor until Intel introduces the chip’s second generation, code-named McKinley, later this year.

“I didn’t think Itanium was going to be spectacular at launch because of the fact that essentially it’s a beta product for McKinley,” said Eric Ross, an analyst at Thomas Weisel Partners.

Intel spokesman Bill Kircos said faster and cheaper chips are always in the pipeline, and that it would not make sense to hold back a launch because something better will be available in the future.

The new processor, code-named Merced, processes information in 64-bit chunks, twice the rate of today’s PCs. As a result, the entire core, including software and secondary chips, had to be redesigned.

Working Together

The processor’s development dates to the early 1990s, when HP and Intel started an alliance to develop advanced technologies. The alliance officially was announced in June 1994.

A the time, Intel engineers could see the limitations in their 32-bit processors that dominate the PC and low-end server markets. While adequate for personal computers, the architecture was not expected to keep pace with demands in future, high-end applications.

HP officials also were looking for partners in developing a next-generation architecture for their own systems. The company previously built its own processors. Under the deal, Intel and HP co-invented the new architecture, and Intel is producing the actual processors and is selling them to both HP and other computer makers.

HP said its products would benefit from the company’s intimate knowledge of the processor’s design. Executives refused to disclose whether HP will pay less or receive other benefits from the collaboration.

Delayed Launch

In 1998, Intel said it would not meet the planned late 1999 launch date. Last year, the world’s largest chipmaker announced yet another delay so that the processor could undergo further testing.

In the meantime, Sun Microsystems Inc. was able to get a leg up, introducing the second generation of its 64-bit processor last year.

Michael Lehman, Sun’s chief financial officer, said the Itanium launch offered no new revelations.

“There is nothing in that announcement that anybody hadn’t been talking about for months, if not years,” he said. “There’s no news there.”

Chipmaker Advanced Micro Devices Inc. also announced plans for a 64-bit architecture, which would extend the existing 32-bit architecture. Analysts believe AMD is focusing more on high-end PCs than servers.

Despite the delays, Intel’s offering will create serious competition, analysts said.

“Intel has not had a product, and all of a sudden they have a product,” Ross said. “It’s essentially going from not-quite-zero competitors to one strong competitor. Intel is not to be trifled with.”