Itaniums Slow Road to Maturity

Six months after its debut, Intel's Itanium processor isn't exactly selling like hotcakes.

Late last week, Dell Computer decided to discontinue its only Itanium-based workstation, the Precision 730. Dell being Dell—one of the most prominent names in the hardware business—many industry pundits saw this as a sign that Itanium, Intels six-month old 64-bit processor, was falling below expectations. Rumors have swirled that sales arent meeting the forecasts set by Intel and its partners. This is hardly the case.

If youre trying to get a fix on the state of the high-end workstation and server market, Itaniums intended market, Dells announcement is not the best of barometers. Intel made clear—even before Itanium was introduced—that sales would be slow until a large number of software applications were written for the chip, which cant reach its full potential when running with existing 32-bit applications.

"There is a very minimal takeup in the market, but thats not surprising given the lack of available operating systems and applications," says Ian Brown, research director with the hardware and operating systems group at market research firm Gartner. "The first generation of Itanium is really just being used to seed the market." To wit, most of the people buying Itanium systems are those who are developing software for the platform. This is why Hewlett-Packard is selling Itanium chips much more often in workstations, which are typically used for software development, than in servers. "The workstations have actually outsold the servers by about 4 to 1," says Jim Carlson, director of marketing for HPs Itanium systems.

Those who will eventually take advantage of Itanium software currently in development have no reason to purchase systems now. Says Brown: "Theres really not going to be any end-user takeup to speak of until the operating systems and applications are there." Many users are also waiting for the arrival of McKinley, the Itanium successor due to arrive sometime in the first half of 2002.

Software developers aside, the only people purchasing Itanium chips are the most experimental and demanding of workstation and server users. "Were seeing buyers in the research community and people in the public sector doing analysis on large amounts of scientific data," continues HPs Carlson. Such users typically write their own, highly-specialized applications. "They roll their own," says Carlson, and dont need to wait for shrink-wrapped packages from other developers.

Its not so surprising, then, that Dell wasnt selling as many Itanium-based Precision machines as it expected to. "Our customers are more focused on Xeon and Pentium 4 for workstations, and thats what we want to give them," says Carmen Maverick, a spokesperson for Dell workstations.

Traditional workstation and server vendors arent selling quite as many Itanium machines as they expected—"even workstation sales have been a bit slow," says Brown—but their original forecasts were fairly accurate. HP has sold fewer servers than anticipated, but it has actually sold more workstations. "We had to increase production," says Carlson. "And we ended up doubling our forecasts."

Brown believes that the first significant increase in sales will come in the first quarter of next year when Microsoft rolls our completed versions of its 64-bit Windows operating systems. Itanium-friendly versions of HP UX and several Linux operating systems are available, but Brown feels that most people are waiting for Microsofts platforms to reach maturity before purchasing Itanium: "The only real production operating system out there is HP UX," he says.

The big boost to Itanium, however, will come with the debut of McKinley. "You cant upgrade from the first generation to the second generation, because Itanium has a 64-bit front side bus and McKinley has a 128-bit bus," says Brown, so many people wont move to the new platform until McKinley arrives.

"Itaniums really going about as well as we expected," says Intels Lisa Hambrick, director of enterprise processor marketing. Slow sales dont necessarily indicate disaster.