Dell Computer Corp. has discontinued its Itanium-based workstation due to weak demand, marking another setback in Intel Corp.s efforts to promote its 64-bit chip released eight months ago.
Dell, the worlds largest workstation vendor, this week confirmed an earlier eWEEK report that it had decided to drop the Itanium-based Precision Workstation 730, withdrawing it from its lineup in late January, after sales reportedly fell below already low expectations.
"I dont think anyone expected sales of the 730 were going to surpass that of other workstations," said Dell spokeswoman Carmen Maverick, in Round Rock, Texas. "It was targeted at a niche market."
Serving small markets runs counter to Dells well-established model of targeting high-volume products where it can best leverage its low-cost manufacturing to undercut rivals prices.
That business model has fueled the companys growth to become the worlds largest PC and workstation vendor, based on unit sales, according to the market researcher International Data Corp.
But since Itaniums release in May, the processor has been anything but a high-volume seller.
According to figures compiled by IDC and Gartner Dataquest, Itanium unit sales appeared in less than 1 percent of 64-bit systems sold last year, underscoring Intels struggles to dislodge established 64-bit market leaders Sun Microsystems Inc., IBM and Hewlett-Packard Co.
"Intel cautioned from the very beginning that sales of Itanium were going to be slow going, but I think even they might be surprised at how slow," said Mike Feibus, a semiconductor analyst for Feibus Strategic Consulting, in Scottsdale, Ariz.
As a result, Itanium was a poor match for Dell, said another industry analyst.
"Dell does volume, and I dont expect volume from Itanium for a while," said Tony Massimini, an analyst with Semico Research Corp., in Phoenix.
The move by Dell is just the latest problem to befall Intels efforts to promote Itanium, which was released last May, roughly two years behind schedule.
In November, Compaq Computer Corp., the worlds largest seller of Intel-based servers, disclosed that it had delayed shipping its first Itanium server after the system failed internal stress tests. The ProLiant 590/64 server, announced in July, finally began shipping last month after Intel provided Compaq with a BIOS update that resolved the problem.
While Itanium faces a difficult challenge to unseat established 64-bit rivals, Intels top-end processor may also be running into problems because of the increasing popularity of the chip makers own 32-bit Xeon processors, which offer high-performance at a relatively low price.
For example, a Dell 730 workstation with a single 733MHz Itanium processor, 18GB hard drive, 1GB SDRAM and 32MB Matrox Millenium graphics card was offered at $7,999.
By comparison, Dell customers could pay only $3,703 for a dual-processor 530 workstation featuring two 2.2GHz Xeon chips, two 80GB hard drives, 512MB RDRAM and Quadro2 Pro 64MB video card.
The 530 is "among our really hot products," said Dell spokeswoman Maverick.
"Theres a little bit of overlap between Xeon and Itanium," Feibus said, noting that Dells traditional focus on 32-bit systems probably helped foster competitive comparisons between the two chips.
"Dells product line doesnt reach as high as IBMs and HPs," Feibus said, "so in that sense Itanium ended up competing against Xeon, rather than other 64-bit processors that usually cost a lot more."
In general, 64-bit processors can process twice as much data per clock cycle as 32-bit and are especially valued for their ability to handle large amounts of physical and virtual memory. For example, while many PCs today use only 128MB of DRAM, a high-end 64-bit system can be called upon to use 4GB of memory.
Such high-performance doesnt come cheap, with 64-bit processors costing $8,000 or more, and systems outfitted with such chips often garnering prices of more than $1 million.
Intel is hoping to eventually tap the higher profit margins of the 64-bit market to offset the shrinking margins on its 32-bit Pentium processors.
The chip maker is counting on the release its second-generation 64-bit chip, code-named McKinley, to heat up sales this summer. The new chip, which some sources speculate will be called Itanium II, will operate up to twice as fast as its current top-speed 800MHz Itanium.
But faster performance alone wont be enough to ignite demand, Feibus said, contending that Intel still faces an uphill battle to sway customers to try a new product over far more established competitors.
"Anybody who expects McKinley, even with double the performance, to light the world on fire is misled," he said. "Its not just raw performance, but a track record, which Intel is now building, that counts. Theres also a lot of inertia [loyalty to established vendors] that you have to break. Thats a lot to turn."