February 12, 2001 5:05 PM PST

Compaq releases Alpha chip amid brighter prospects

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Compaq Computer released a new version of its Alpha processor for servers on Monday amid signs that the outlook for the chip is improving.

The new Alpha 21264 runs at 833MHz and will be included in Compaq's AlphaServer ES 40 line of servers, complex machines that sell for tens of thousands of dollars and up. Some customers, including biotechnology companies, already had access to early versions of the server. Today's announcement, however, signals the beginning of general commercial availability.

The chip is roughly 18 months late, but, in the overall context of the high-end server market, that's not a big deal. Sun's UltraSparc III processor arrived on the market approximately a year after its original due date. Intel's Itanium processor was originally going to appear toward the middle of 1999; Itanium servers now are due this quarter, but further delays could occur, sources have said.

"It's sort of a contest to see who could fall behind the least," said Nathan Brookwood, an analyst at Insight 64.

Just as importantly, Alpha has begun to experience firmer traction in the marketplace. Originally designed by Digital, the Alpha chip for years was considered an example of state-of-the-art technology that few people wanted to buy. The chip, and servers based around it, won a dedicated core of customers that remained small in number.

Compaq acquired the chip as part of its purchase of Digital in 1998. Since then, the technology's early death has often been predicted.

But rather than fade away, the chip has actually experienced growth. The Houston-based computer maker saw 17 percent growth in revenue in its business critical server unit in 2000, with two-thirds of the unit's revenue coming from Alpha servers.

In the first half, Ericsson will commercially release its first telecommunications switches containing Alpha chips, according to Rick Frazier, vice president of business critical servers at Compaq. It's a new market for Alpha, he said, and more deals could follow.

Additionally, "We've landed six of the last seven major supercomputer contracts," Frazier said.

The renewed interest in the platform has come partly from a narrower sales strategy engineered by Compaq CEO Michael Capellas, he said. Instead of targeting the entire server market, Compaq refined its strategy to focus only on select sub-segments, such as the supercomputer market or for e-business customers using Oracle applications.

This made it easier to concentrate on deals that the company stood a good chance of winning.

"The general-purpose marketplace is under attack from the world," Frazier said. "The fact that we are the only major computer in the computing industry that has a CEO who did tour of duty as a chief information officer has helped."

Compaq also saw sales recover in the middle of 2000 with the release of the first "Wildfire," or GS class Alpha servers. The servers were delayed earlier by component shortages, according to Terry Shannon, editor of the Terry Knows Compaq newsletter. While sales failed to meet earlier projections for the year, Compaq still managed to sell $800 million worth of GS servers.

Although analysts say it is too early to declare that the war is won, the company is making progress.

"Alpha continues to get good market share for its technology. They are still doing very well with the established customers," Brookwood said. "To Compaq's credit, there were many who thought that when Compaq acquired Digital, Alpha would be one of the first things to go."

The 833MHz Alpha is the first new Alpha chip since a 733MHz version was announced last year. Despite the one-year hiatus, more activity is coming. A 1GHz version of the 21264, originally due at the end of 1999, is being made in samples right now, said Shannon. "They are getting the chips in volume from IBM right now," he said. IBM serves as Compaq's manufacturer.

News about the 21364, the successor to the 21264, should also begin to emerge, he said. The chip, which contains a Rambus controller, was originally slated for the middle of 2000.

 

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