HP’s 64-bit Surprise

UPDATE: Despite its close ties with Intel, Hewlett-Packard will announce support for AMD’s Opteron server chip this week, internetnews.com has learned.

The Palo Alto, Calif.-based computer and printer maker has scheduled a Tuesday morning press conference to discuss “the expansion of its industry standard solutions portfolio.” As late as Monday, HP execs refused to comment on the announcement, deferring instead to previous statements that the company has been monitoring AMD’s 64-bit progress. In an interview at Intel’s developer conference last week, HP vice president of marketing Business Critical Servers Donald Jenkins told internetnews.com the company is standing firm on its current enterprise server configurations made up of Itanium processors for its Integrity systems, PA-RISC chips for its HP 9000-series mainframes and x86-based solutions for its ProLiant boxes.

Now HP becomes the third major server vendor to throw its support behind Opteron, following both IBM and Sun Microsystems . A representative from Dell said the Round Rock, Texas-based company had no plans at this time to stray from its exclusive contract with Intel .

Ironically, it was during last week’s conference that HP pledged support for Intel’s forthcoming 64-bit extensions for its x86 family of processors. On the surface the decision to support Intel’s extensions put HP in a jam as the two companies already have a joint 64-bit investment in the EPIC-architecture Itanium chip family. However, most analysts queried say neither HP’s x86 64-bit Intel nor its Opteron choice will not affect its Itanium strategy as it plays in a different market.

“HP has done a fair amount of business with AMD in the past, so, this is not a big departure,” IDC analyst Roger Kay told internetnews.com. “However, most of this business has been in consumer PC products. HP had a commercial notebook with AMD that it tried to float a couple of years ago, but AMD has needed a tier-one OEM to back its parts in commercial products for a long time. AMD has had Opteron in the market for some time now, and Intel only recently announced its intention to create an IA-32 with 64-bit extensions-part for low-end servers. Thus, HP has chosen — for this round, at least — a part that has been banged on over one that hasn’t. HP can re-evaluate its position anytime, but certainly in the short-term this is a win for AMD.”

While HP has yet to disclose its details, analysts like Martin Reynolds with Boston-based Gartner Dataquest are already suggesting Opteron offers great price-performance against Xeon systems and would be a good strong fit in HP’s 2- and 4-way configurations.

“HP can leverage its brand to sell AMD servers and make more profit,” Reynolds told internetnews.com. “Because Intel products can be readily substituted, this is a low-risk strategy for HP and its customers.”

That low-risk strategy may help HP’s bottom line in the long run. During its financial earnings report last week, HP said its UNIX server sales dipped reflecting intense pricing pressure, particularly in the high-end and low-end. However, HP said its x86 server market share increased to almost 33 percent.

But is HP’s tactic actually much more than just adding Opteron? According to Enderle Group founder and industry analyst Rob Enderle, the answer is yes. Instead of relying on just one set of options, Enderle points out HP already uses a multi-tier software strategy; supporting Microsoft, Linux and a cross section of their own operating platforms, as well as a multiple processor support from Intel, Transmeta, and AMD. Enderle said HP’s goal is to create solutions that are optimized for the customer as opposed to the vendor, or the vendor’s vendor.

“There is a widely held belief that IT managers will focus on the primary provider and not the technology underneath when evaluating a solution,” Enderle told internetnews.com. “If they trust that provider, it doesn’t matter what the components are, and, if they don’t trust the provider they won’t chose them. This belief flies in the face of programs like ‘Intel Inside’ which successfully attach value to certain components.”

Strangely enough, Enderle muses, the belief has been widely tested (largely through marketing studies) and has held up. Just as curious, most vendors hold to the contrary position that the components are important and the end result has been a commodity market where there is little true differentiation.

“HP is going to take a measured risk that their brand, and company, is strong enough to step away from the direction the market is going and return it to one that favors HP’s model over Dell’s,” Enderle said. “This means that they won’t be choosing products exclusively from the dominant vendors, but the products most appropriate for the task, to create the lowest cost best match solution for their customers. If they can pull this off, and it won’t be easy, they will have a sustainable advantage against Dell; this is the only path I can see that will take them anywhere near where they want to go.”

And if there is to be software support, HP doesn’t have to look any further than Microsoft, which said it would only invest in one operating system that will support all 64bit extended systems. Even Intel CEO Craig Barrett concurred, noting that the design of the chips from Intel and AMD would differ but that software and OS for the market “probably, for the most part, will run on both systems.”

“Now we know why Microsoft was delaying the AMD64 support,” Am Tech Research analyst Rick Whittington said in a recently released investor’s note.

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