Dell Drops the 730

Itanium-based workstation had very low sales; causes problems for Intel.

Dealing another blow to Intel Corp.s efforts to market its 64-bit chip, Dell Computer Corp. has discontinued its Itanium-based workstation due to weak demand.

Dell, the worlds largest workstation vendor, confirmed that it dropped the Itanium-based Precision Workstation 730 late last month after sales 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 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. But since the Itaniums release in May, the processor has been anything but a high-volume seller. According to International Data Corp., in Framingham, Mass., and Gartner Dataquest, in San Jose, Calif., Itanium chips 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, an analyst for Feibus Strategic Consulting, in Scottsdale, Ariz.

As a result, the Itanium was a poor match for Dell, said another analyst. "Dell does volume, and I dont expect volume from Itanium for a while," said Tony Massimini, with Semico Research Corp., in Phoenix.

The move by Dell is the latest problem to befall Intels efforts to promote the Itanium. In November, Compaq Computer Corp., the largest seller of Intel-based servers, said 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, of Houston, with a BIOS update that resolved the problem.

Intel, of Santa Clara, Calif., hopes to tap the higher profit margins of the 64-bit market to offset the shrinking margins on its 32-bit Pentium processors. The company is counting on the release of its second-generation 64-bit chip, code-named McKinley, to heat up sales this summer.