January 26, 2004 3:05 PM PST

HP to adopt AMD's Opteron in servers

Hewlett-Packard plans to come out with servers that contain Advanced Micro Devices' Opteron processor, another significant win for AMD.

Palo Alto, Calif.-based HP is expected to insert chips into ProLiant servers that contain one to four processors, sources said. The announcement will take place in February, but the servers may not be released commercially for a while, sources said.

The Opteron chip, which debuted last April, has allowed Sunnyvale, Calif.-based AMD to move from the fringes of the lucrative corporate computing market toward the center.

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IBM has come out with servers and workstations using the chip. Meanwhile Sun Microsystems has said it will come out with servers containing the chip and port its Solaris operating system to it later this year.

With HP, AMD will have design contracts will three of the world's four largest server makers. Dell, which uses only Intel chips in its computers, is the notable holdout. Large server manufacturers concentrating in European and Asian markets have also adopted the chip.

"It (Opteron) is an inexpensive way to build a high-performance server," Gartner analyst Martin Reynolds said.

The deal could be seen as a setback for Intel. One of the chief features of Opteron is that it can run 32-bit software, which is now found on desktops and Intel/AMD servers, as well as 64-bit versions of the same applications and OSes. The 64-bit computers can handle more memory and are used to run databases and other ornate applications. As a result, the chip lets IT managers install more powerful computers without changing their software base substantially.

AMD declined to comment, and HP could not be reached for comment.

Microsoft will come out with a 64-bit version of Windows tweaked for the chip in the second half of 2004. (Standard 32-bit Windows already runs on Opteron.) Versions of Linux in 64-bit mode already exist. IBM has ported a version of its DB2 database software to run on 64-bit Linux for Opteron.

Intel's Itanium chip family runs 64-bit software, but it's entirely different than the Windows/Linux software found on 32-bit machines, a factor that has held back acceptance. In the third quarter, around 10,700 Opteron servers left factories compared with 5,000 Itanium servers, according to IDC. Revenue from the Itanium servers, however, came to $123 million, compared with $61 million for Opteron servers.

HP has been a staunch defender of Itanium in the server community and for good reason: It co-designed the architecture behind the chip.

"What choice do they have? Very few organizations are buying Itanium systems. AMDs are flying off the shelf," RedMonk analyst James Governor said. "Any server company that does not have an Opteron strategy is not listening to the market."

Intel, though, has vowed to increase the available applications for Itanium, as well as work to ensure that the price of Itanium servers steadily drops.

Still, Reynolds pointed out that Itanium and Opteron don't directly compete. Itanium is designed to compete with servers containing four or more processors from Sun. These systems typically cost $10,000 to more than $1 million and are used for the most complex computing tasks.

Opteron is designed to compete more in the one- to four-processor segment, a market currently dominated by Intel's Xeon chip. Although these servers sell for far less, they account for far more units. "That's where the growth is," Reynolds said.

Like Reynolds, Roger Kay, an analyst at IDC, could not confirm or deny the HP-AMD deal. Still, he said it made sense. Opterons are relatively inexpensive and will let HP serve customers that want Opteron servers. The company already uses AMD chips in consumer and business desktops.

"HP already broke with the orthodoxy when they put Transmeta chips in their blades," Kay said.

In addition, HP sells servers containing its own PA-RISC chips and Alpha processors.

CNET News.com's Stephen Shankland and John Spooner contributed to this report.

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