Compaq plans switch to Intel processors
Associated Press
SAN JOSE, Calif. — Intel Corp.'s quest to dominate the high-end server market got a major boost yesterday as Compaq Computer Corp. said it plans to abandon its own Alpha processor in favor of Intel's Itanium processor by 2004.
It's the latest sign that the server industry may be moving from proprietary chips to standardization that marked the development, growth and flexibility of PCs.
Compaq is the second maker of processors and servers — workhorse computers that power everything from corporate networks and Web sites to biotechnology research — to announce plans to eventually exit the chip business.
Hewlett-Packard Co., which co-developed Itanium, also said it will consolidate its products behind the Intel processor.
For Intel, the agreement represents not just another customer, but a major endorsement of Itanium, which was put into production this year after several delays and nearly a decade of development.
"Itanium needed an imprimatur of legitimacy," said Drew Peck, an analyst at SG Cowen Securities. "Compaq gave it to them. It's a high-profile win."
High-end servers account for about half of the $54 billion total server market. Major players include International Business Machines Corp., Sun Microsystems Inc., HP and Compaq.
So far, Sun is the only company that does not plan to incorporate the Itanium into its designs, instead relying on proprietary processors.
The announcement comes as both Intel and Compaq are struggling to regain their footing as their PC-related businesses struggle.
Compaq faces a brutal price war with other PC makers, including Dell Computer Corp. Intel also has seen its margins and market share erode amid increasing competition and the economic downturn.
Compaq announced plans in April to cut more than 9,000 full-time and part-time jobs. In an internal memo this month, executives announced plans to reduce overhead costs by another $200 million per quarter.
More than half of Compaq's revenues now come from non-PC businesses, including its servers and services businesses, Winkler said.
Intel has been diversifying beyond its 32-bit processors that are found in roughly 80 percent of personal computers around the world. Its targets are now on high-end server makers Sun Microsystems Inc. and IBM.
