This week the IT community witnessed a very public reconciliation of two estranged vendors. On Monday, Sun Microsystems and Intel Corp. outlined a "comprehensive relationship" that will change the dynamics of the server market. For the first time Sun will use Intel Xeon processors to build a complete line of workstations and servers, while Intel will support and distribute Solaris, Sun's home-grown OS. Sun CEO and president Jonathan Schwartz and his Intel counterpart, Paul Otellini, announced the new alliance at a joint press conference in San Francisco.

The pony-tailed Schwartz and the more conservative looking Otellini appeared together to speak about the new partnership. The relationship would have been hard to conceive of in the past six years, as Sun and Intel jousted with each other over Itanium adoption and competing x86 strategies. In 2000, the original plan to port Solaris onto Intel Itanium platforms ran aground when Intel realized that Sun had become disinterested in the project. Later when Sun decided to add its own x86-based server line, it chose to do so exclusively with technology from AMD, Intel's nemesis.

"I think we've had a bit of ebb and flow in our relationship," admitted Schwartz, "but I think we've only been detecting flow in the last six months and we want to continue to see that go forward."

Sun plans to start delivering Xeon-based platforms sometime late in the first half of 2007. The company will be offering one, two and four socket Xeon-based systems this year, and envisions eight socket machines at some point in the not-too-distant future. The addition of a Xeon lineup means Sun will join IBM, HP and Dell -- all of whom provide a choice between AMD and Intel hardware.

With the addition of Xeon-based systems, Schwartz expects that Sun will be able to take advantage of Intel's x86 volume leadership to expand their market and compete more effectively with the other dual-vendor OEMs in the x86 server space. Realizing that the marketplace is demanding choice, Schwartz noted: "It's evident that customers wanted [Sun and Intel] to work together."

The alliance also represents Sun recognition of Intel's renewed momentum. Up until last year, AMD's multi-core processors enjoyed clear performance and energy efficiency advantages over Intel's pre-2006 offerings. But with last year's introduction of the Intel Core architecture and the first quad-core x86 processor, the company has caught up to, and in some cases, overtaken AMD in x86 supremacy.

The other significant part of the new relationship will revolve around the Solaris operating system. Intel will support Solaris on a range of Xeon processors and use its market leadership to help expand the software ecosystem around the Solaris/Xeon platform. Intel has signed an OEM agreement for Solaris, which should speed its penetration into established Intel markets. Intel is seemingly attracted by the rapid growth of Solaris on x86 platforms since it went open source in 2005. Of the seven million Solaris licenses, around 70 percent are now on x86-based systems. Solaris also reaches into market segments where Intel has little penetration.

"The installed base of Solaris is in a lot of places where Intel is not [well established]," said Otellini. "Financial services and telecommunications are two markets where Solaris is very strong. Being able to offer an optimized environment on Solaris/Xeon into those markets makes sense for us."

Schwartz considers Intel's endorsement of the OS as perhaps the most important part of the agreement. From his point of view, with Intel behind the Sun OS there's no longer any doubt that Solaris will be the dominant Unix platform going forward.

In addition, Intel's close relationship with Sun will enable it to coordinate microprocessor technology, such as hardware-assisted virtualization, with Solaris OS enhancements. This could be significant advantage for both companies as the x86 moves up the food chain in the enterprise. Otellini declared that Solaris will be the mission critical Unix for Xeon.

Sun is also hoping that the Solaris effort will help them leverage the OS into its high performance computing solutions. The company would like to expand Solaris adoption in HPC and the injection of Intel support could help make this happen. Bjorn Andersson, Sun's director of HPC and Integrated Systems, thinks that Solaris is well-positioned for high performance computing as it expands into more commercial applications like energy, life sciences and financial services. According to him, the reliability and availability demands of the enterprise data center make Solaris an attractive platform, and he is seeing much more interest in the OS from commercial HPC users.

As Sun and Intel look to develop future Xeon-based SMP systems above four sockets, the inherent scalability of Solaris starts to look even more attractive. Sun is a proponent of scaled up x86 systems; its Sun Fire X4600 server is the only eight socket (16-way) Opteron-based offering by a Tier 1 vendor. The production of a cost-effective, eight socket Xeon-based system could be a breakout product for the company. Andersson believes this is an area where "the collaboration between Sun and Intel could really set us apart from the competition."

The news of the alliance comes at a bad time for AMD. In the face of renewed competition from Intel and the costs related to the acquisition of ATI, AMD reported its first quarterly earnings loss in nearly two years. Having to share Sun with Intel will put even more pressure on AMD to maintain its market position in the price-sensitive server space. In the past two years, Sun has built a successful line of Opteron-based servers for high performance computing, virtualization and database applications. Without its exclusive arrangement at Sun, AMD can only hope that sales of Opteron servers don't erode.

The only missing piece in this alliance is the Itanium strategy. Sun has no plans to build systems with Intel's high-end server chip, nor does Sun plan to support Solaris on Itanium. At least in public, Intel respects Sun's position.

"I think it would be wrong to reopen the religious war on Itanium," said Otellini. "Right now Solaris does not support Itanium; if they decided to support it, we'd love it. If they don't, that's a business decision on their side."