HP shifts last of Itanium work to Intel

Itanium will now be a full-fledged Intel project as HP further exits the chip design business.

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By Michael Kanellos
Staff Writer, CNET News.com

Hewlett-Packard and Intel designed the Itanium chip together, but HP is handing the project over.

Palo Alto, Calif.-based HP will shift a processor design team located in Colorado to Intel, a transfer that will place control over the design of the processor family in Intel's hands, according to sources. Like IBM, NEC and others, HP will still likely design chipsets for many of its Itanium servers, but it will effectively not participate in designing the processor itself.

Neither company would comment on the transaction, which is expected to be announced Thursday. An HP representative, however, did state that HP does currently participate in the design of Itanium.

If anything, the deal will likely ease some tensions between Intel and its Itanium customers. As co-developer of the chip, HP has had greater input into its design than other server makers. Some have also quietly voiced concerns that HP's special status in the joint venture could give the company advantages.

Going forward, HP will likely remain the server manufacturer that most promotes Itanium, but it will be on an equal footing, technologically speaking, with its competitors.

Mark Margevicius, an analyst at Gartner, said he didn't know if such a transaction would take place but said it could help HP improve its bottom line: "It makes good sense. HP needs to focus on manufacturing efficiencies."

The deal will also mark one more step in HP's long exit out of the processor business. HP acquired the Alpha processor family when it bought Compaq Computer in 2002. Since then, it has transferred many Alpha engineers to Intel. In August, it put out its last chip in the Alpha family.

HP is slated to come out with only one more PA-RISC chip, the 8900. It will appear in 2005. PA-RISC chips, which compete against IBM's Power4 and Sun Microsystems' UltraSparc processors, are homegrown RISC processors for high-end servers. Although HP will stop coming out with new versions of Alpha and PA-RISC chips, it will continue to sell new servers containing these chips for a few more years and support these servers into the next decade.

The Itanium saga dates back to December 1988 when HP and Intel began to cooperate on a chip architecture then called EPIC. The idea was to combine HP's know-how in high-end server chips with Intel's manufacturing prowess. The intellectual technology behind the chips was transferred to a shell company to prevent others from obtaining a license to manufacture it through pre-existing licensing deals with Intel or HP.

By the mid-1990s, the future EPIC chips, known as Merced, loomed as a danger to Sun Microsystems, Digital Equipment, IBM and other server makers that also made their own chips. Some analysts, looking at the amount of money Intel was putting into the project, also speculated that EPIC chips would take over desktops.

Making Merced, however, in practice and, after several lengthy delays, the chip went from being a giant killer to a conceptually interesting test vehicle. The chip finally came out commercially in May 2001. Performance was relatively anemic, and sales were even worse.

Performance improved with every succeeding chip. Servers based on Itanium 2 processors now can be found at the top, or near the top, on many benchmark tests. Sales, though, still do not meet expectations--Intel will miss its earlier stated goal of shipping 200,000 chips this year. HP itself stopped selling Itanium-based workstations earlier this year.

Although a lack of software has hampered Itanium adoption, the chips have also often cost more than Xeon or Opteron chips. Intel is aiming to eliminate any price difference by 2007.