HP HOPES NEW SERVER WILL PRY OPEN SUN’S MARKET

December 1, 2000

COMMERCIAL NEWS

San Diego, CALIF. — Stephen Shankland reports that Hewlett-Packard sent in reinforcements in its battle against Sun Microsystems in the Unix server market, introducing new low-end server hardware that inherits features from the company’s more expensive systems.

The new servers, along with more flexible payment options, should help HP stay in the Unix game. Still, the company has a long way to go before catching up to Sun, which is benefiting from an ongoing boom in server demand fueled by the Internet.

IBM, also eyeing the billions of dollars of revenue in the Unix server market, is furiously working to catch Sun and stave off HP. It recently introduced a new top-end pSeries Unix server and plans midrange improvements in spring 2001.

HP’s new L-class 3000 server, with as many as four PA-RISC 8600 processors, comes with the faster internal data transfer abilities first seen in HP’s eight-processor N-class servers, said Mark Hudson, marketing manager for HP’s business systems group.

Perhaps as important as the hardware upgrade, though, is the arrival of “partitioning” software that lets a customer run two or more separate versions of the operating system on a single system. Customers can use one partition to run the actual work the server is doing and one to test new software, for instance.

The software version of partitioning in the L3000 is less sophisticated than what’s planned for HP’s upcoming Superdome 64-processor Unix server, which also includes more powerful hardware partitioning features. But it’s better than what’s offered by HP’s biggest rival, Sun, which has partitioning on its high-end E10000 server and plans to introduce it on new midrange systems in the first half of 2001.

Hudson acknowledges HP faces an uphill climb but says he sees vulnerability at Sun, which has been plagued by memory problems that cause its servers to restart unexpectedly. Sun also faces a transition to a new chip architecture, the UltraSparc III, and doesn’t yet offer partitioning technology, he added.

“We feel we’re a generation ahead, if not more,” Hudson said. Sun has strong momentum, “but the next six to nine months will be the real telltale whether they can keep on. We have to execute, and they have to stumble, but that’s what it’s all about.”

Analysts said HP’s recent weak financial results are ultimately the result of lower demand from larger corporate customers. “We find it difficult to conclude that sickness in (HP’s) enterprise business is not the underlying cause” of the weak results, Merrill Lynch analyst Thomas Kraemer wrote in a recent report. “Our view (is) that HP is becoming an Internet infrastructure ‘have-not.'”

HP also is in the process of hiring more than 2,000 new employees to sell Unix servers and has been working to make sure software companies support its version of Unix, HP-UX, Hudson said.

The company offers customers several ways to pay for the L3000. One way is through the capacity-on-demand program HP introduced in 1999, which lets a customer buy a system with more CPUs than needed, paying for the extras only later when they’re turned on.

HP also lets customers buy collections of servers and install but not pay for them until they’re used, Hudson said. This capacity-on-demand program for servers was introduced in May, he said.

Finally, beginning in the first half of 2001, HP will offer its “utility pricing” model, in which companies pay an up-front fee for the server, then pay a monthly fee depending on how much the CPUs are used. This model will be cheaper for retailers or Internet service providers that experience occasional bursts of heavy use, Hudson said.

The utility pricing model will also arrive on HP’s high-end Superdome computer in 2001. Production of Superdome systems is expected to begin in high volume in December and January, Hudson said.

Prices for the L3000 are expected to range between $40,000 for an entry-level system to $160,000 for a fully configured one. The machine can accommodate as much as 16GB of memory. It also comes in a version certified to meet the Network Equipment Building System standard for telecommunications companies whose servers must run in hot or cold weather, through earthquakes, and on DC current if the power goes out. The lower-end L-class computers were introduced in September 1999.

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