Report of New Intel Chip Makes Sense, Analysts Say

According to the San Jose Mercury News, Intel is working on an alternative 64-bit chip. Though Intel declined to comment on unannounced plans, analysts said the move makes sense.

Intel Corp. is secretly developing an alternative 64-bit chip the company can turn to should its $1 billion Itanium design flops, according to a newspaper report Friday quoting unnamed sources.

And though Intel spokesman Howard High, in Santa Clara, Calif., declined to comment on the report, published by the San Jose Mercury News, industry analysts said the article largely confirms what they had long suspected.

"Its really just insurance," said Kevin Krewell, a chip analyst with Cahners In-Stat/MDR in Sunnyvale, Calif. "But, of course, its something they dont want people to know about."

In fact, word that Intels developing an alternative 64-bit processor based on its existing Pentium design could undermine its efforts to sell computer makers and corporate customers on Itanium, which features a entirely new architecture and requires users to adopt new software to run.

For many companies, the alternative design could be more attractive because it would be largely compatible with their existing software, resulting in significant costs savings compared to adopting Itanium.

"If people really thought this was coming, a lot of customers evaluating Itanium would say, Well, if we could have a compatible chip that does a lot of what Itanium does, but is also more compatible with our existing 32-bit software, that might be a better deal for us, " said Nathan Brookwood, an analyst with Insight64 in Saratoga, Calif. "That could take the wind out of the Itanium sails."

In general, 64-bit processors are used to power high-end workstations and servers that are capable of handling massive amounts of memory and data. Until Itanium, Intel has had no presence in high-end 64-bit servers, which can cost several million dollars a piece.

Currently, Sun Microsystems Inc., Hewlett-Packard Co. and IBM dominate the 64-bit market, but Intel is counting on Itanium to serve as its flagship product and help assure the companys future growth and profitability.

But since its release last May, Itanium has attracted few buyers. The chip, developed over seven years at an estimated cost of $1 billion, so far has appeared on only a fraction of 64-bit servers sold, according to Gartner Dataquest.

While Intel representatives are confident sales will vastly improve once a faster performing second generation Itanium chip, codenamed McKinley, is released later this year, the company is apparently hedging its bet.

In Fridays edition of the San Jose Mercury News, the newspaper reported that a group of Intel engineers, dissatisfied with Itaniums design, were given the go ahead by Chief Executive Craig Barrett to develop an alternative 64-bit processor that basically builds upon the companys existing Pentium architecture.

According to the newspaper, work on the project, given the codename Yamhill Technology, is under way at Intels facilities in Hillsboro, Ore.

If Intel eventually does choose to replace the Itanium with an alternative chip, it wouldnt mark the first time the company has changed course in mid-stream.

In the early 80s, Intels roadmaps called for the company was counting a new chip design, the IAPX432, to serve as the basis for its transition from 16-bit to 32-bit processors.

"It was going to be a revolutionary processor with the ability to do 32 bits," Krewell said. "But it was about 10 years ahead of its time in terms of process technology and chip integration point of view -- and totally flopped."

"The 432 turned out to be a huge chip that ran very slow," agreed Brookwood.

Fortunately for Intel, a small team of engineers had developed an alternative 32-bit design based on Intels 16-bit 286 design, an architecture that become known as the 386 processor and stands as the predecessor to the chipmakers fastest product today, the 2.2GHz Pentium 4.

"The reality was that the 386 became Intels 32-bit solution, and saved the company, more or less," Krewell said.

While Intels secret development efforts may once again prove a wise move, the covert effort may also inadvertently benefit rival chipmaker Advanced Micro Devices.

AMD, based in Sunnyvale, Calif., has announced plans to produce a 64-bit processor based on the x86 architecture, similar to Intels reported alternative design. But the future acceptance of AMDs 64-bit Hammer processor may hinge on the support of another key industry player, Microsoft Corp..

While AMD likely holds little sway in trying convincing Microsoft to develop an x86 64-bit operating system, it becomes a whole another matter if Intel wants it done, Krewell said.

"AMDs x86 64-bit processor has an uphill battle with one really key vendor, Microsoft. If AMD doesnt get support, its chips are only going to be of interest to a relatively small group of Linux hackers," he said. "But if Intel has plans for such a chip, then Microsoft has to do it."

Even if Intels alternative processor is only in the early design stages, the chipmaker has likely already requested that Microsoft create software for it, Krewell said.

"Intel cant develop some secret hidden technology and then suddenly spring it to life and say, here it is, " he said. "They need to have Microsoft support it. And if Microsoft supports it, then it shouldnt be that much more difficult to support AMDs similar design as well."

For its part, AMD said word that of uncertainty about Itanium within Intels own ranks should give customers pause.

"Its not just Intel making a bet here on Itanium, its CIOs who have taken a chance and bought Itanium machines, or the software developers that have spent $100 million porting software to Itanium that are at risks," said Pat Moorehead, AMDs vice president of customer advocacy. "After hearing about how Intels wavering, they are going to be asking the question, Hey, whats going on here."