So Long Alpha, Hello Itanium

Compaq Computer Corp.'s decision last week to abandon its high-end Alpha processors and embrace Intel Corp.'s Itanium chips comes as the computer maker slashes expenses in hopes of bolstering revenues.

Compaq Computer Corp.s decision last week to abandon its high-end Alpha processors and embrace Intel Corp.s Itanium chips comes as the computer maker slashes expenses in hopes of bolstering revenues.

Michael Capellas, chairman and CEO of Houston-based Compaq, said the decision to support Itanium was made in the best interest of Compaq customers. However, a senior executive acknowledged that the need to cut costs helped spur the move.

Whatever the root cause, Compaq customers applauded the move, saying that bringing together two strong technologies will only benefit users, both in price and performance.

"What I actually thought was Intel finally realized how much trouble it was in," said Marshall Peterson, vice president of infrastructure technology for Celera Genomics Group, in Rockville, Md. "Intel was way behind on its high-performance, 64-bit chip, and Alpha has been far and away the fastest. We think its very positive." Celera, which specializes in genomics research, uses Alpha chips to deal with extremely large data sets.

"I think its great theyre going with Intel. They should have done that a long time ago," said Celia Lin, who oversees servers at a Texaco Inc. data center in Houston. Lin cited Intels ability to develop and sell chips at a good price. "We are looking for more of a commodity product," she said. "While I know Intel is still proprietary, its accepted as an industry standard, and thats where we want to go."

Compaq will continue to invest in the Alpha until the chip is phased out in 2004. The company will introduce a new Alpha chip—the EV7—late next year but has halted development on its successor. Compaq will also migrate its high-end computing systems to Intels 64-bit Itanium processor.

Compaq acquired the Alpha technology when it bought Digital Equipment Corp. in 1998 for $9 billion. While a top performer, the chip failed to gain a dominant market share, and what little share it did enjoy has eroded in recent years. Compaq eventually felt that future sales would not be enough to offset development costs.

Mike Winkler, executive vice president of Compaqs Global Business Units, said design and development costs for Alpha were costing the company $300 million a year.

The computer maker, rocked by the sharp slowdown in the PC market, will see immediate results from the deal with Intel. A few hundred Compaq engineers will go to the Santa Clara, Calif., company immediately, with more following once the EV7 is phased out, Winkler said.

One analyst questioned whether Compaq ever understood how pricey developing processors can be when it acquired the Alpha three years ago.

"I think Compaq either underestimated how much it costs to maintain a microprocessor architecture like Alpha, or they were just trying to get by on the minimal possible investment," said Linley Gwennap, an analyst with The Linley Group, in Mountain View, Calif. "In either case, they havent been funding the necessary development the Alpha processor required to keep it competitive."

Winkler said other companies, such as Sun Microsystems Inc., will follow Compaqs lead because RISC-based chips such as the Alpha and Suns UltraSPARC are being overrun by Intel.

Sun, of Palo Alto, Calif., disagreed. "RISC is not running out of steam," said David Yen, vice president of the processor products group. "We have several UltraSPARC projects going on here, and there are more features and things I can do with the chip than I can even address."