UPDATED: HP quits Itanium development programme

By Steve Malone

Posted on 16 Dec 2004 at 10:17

Hewlett-Packard has pulled out of its partnership with Intel and is quitting further development of the Itanium processor.

HP said that it wanted to leave Intel free to develop the Itanium whilst it could get on with what it did best, making Itanium-based servers.

As part of a severance deal, HP's Itanium development team, with its several hundred engineers, will transfer to Intel.

Once seen as the future of server processing, the Itanium never really took off in the way the partners hoped. When the project was announced in 1988, the deal looked like a match made in heaven. HP would contribute its expertise in developing high performance processors and Intel would bring high volume manufacturing nous.

However, the project was much delayed and when the Itanium finally appeared in 2001, the world had moved on. The high end volume server market was squeezed between products from IBM and Sun at the top and Intel's own Pentium and Xeon products below. The IT recession of the time didn't help either. An Itanium 2 revived the fortunes of the chip, but never to the original expectations.

Although the announcement will be another PR blow to Intel to round off what has been a rotten year for the company, it will not affect Intel's bottom line significantly as Itanium revenues are tiny in comparison to the Pentium range. In fact, it may even help broaden Itanium's appeal as OEMs are more likely to look favourably on a chip that is not co-designed with one of their major competitors.

John King, Server marketing Manager in the Enterprise Space, told us, `We are still working closely with Intel who specialise in chip development, said . As you know the cost of chip development is so high these days. We are focussing on our core competencies of development of the platform, the operating system and the surrounding applications`.

More interesting is what is likely to happen to the HP server division. HP says will continue to use Itanium chips in its servers and has committed $3bn over the next three years to continue the development of Itanium in the high-end server market. Nevertheless, HP will have taken a good look at the latest server market figures.

According to November's IDC's Worldwide Quarterly Server Tracker HP held a 34.3 per cent market share in the x86-64 Xeon and Opteron market. IDC found that shipments in this market grew 18.3 per cent over the year to more than 1.4 million servers worldwide generating revenues of $5.4bn worldwide. The AMD Opteron alone grew by over 400 per cent over the year.

Whilst Itanium-based Integrity servers also grew significantly - the company claims a 66 per cent growth in shipments - this is not where the action is. HP is going to want to shore up its defences in the x86 server market where Dell is coming up fast.

King said, `The Itanium is our basic offering in the RISC replacement market which is a $20 billion industry. The Itanitum 2 is taking the RISC industry by storm. This is not just RISC replacement of Apollo machines but also Sun and IBM. Our publicly stated goals are that we will overtake Sparc in 2005 and Power in 2006.`

HP is not likely to pull out of Itanium servers soon, but if the dual core Opterons promised for next year are as good as AMD say they are, then the long term future for the pricey Itanium does not look good.