Compaq To Abandon Alpha Processor, Move Entire Server Line To Intel Chips

The Alpha has met its Omega. In a major shift in its enterprise computing strategy, Compaq says it will abandon its Alpha microprocessor technology, acquired as part of its $9.1 billion buyout of Digital Equipment Corp. in 1998, and shift all of its high-end servers onto Intel's 64-bit Itanium chip. "The Intel architecture is the best choice for the enterprise," Compaq CEO Michael Capellas said at a press conference Monday morning in New York City with Intel CEO Craig Barrett at his side.

Under terms of a multiyear deal, Compaq will move servers that run its Tru64 Unix, Open VMS, and NonStop Himalaya operating systems from Alpha and MIPS chips onto Itanium by 2004. Prior to that, Compaq says it will deliver one more generation of Alpha technology--the EV7, slated for introduction next year--and will continue to develop its Mips platform. Some Alpha-chip technology will live on as the agreement calls for Intel to incorporate elements of Alpha into Itanium under license from Compaq for an undisclosed sum. Intel also will hire a number of Compaq engineers currently working on Alpha. "This gives us access to a super engineering staff that really understands the high end of computing," Barrett said.

Intel formally launched Itanium last month with hopes that its 64-bit architecture and parallel execution capabilities will bolster the commodity chipmaker's presence in the high-end server market. Intel plans to introduce a more powerful version of Itanium, presently dubbed McKinley, next year.

Some analysts say Monday's news represents a tacit admission by Compaq that its Alpha and Himalaya platforms, which accounted for $3.2 billion in sales last year, have limited growth potential that doesn't justify ongoing development expenses. "It shouldn't be too big a surprise that Compaq is phasing out Alpha," says Merrill Lynch chip analyst Joe Osha. "Most high-end systems that Compaq is going to ship over the next few years were going to be based on Intel anyway. It's not like Alpha has been a dominant architecture." Just 18 months ago, Compaq, along with manufacturing partners Samsung Electronics and Alpha Processor Inc., said they would jointly spend $500 million over the next several years to further develop and market the Alpha chip. It wasn't immediately clear how Monday's news affects that agreement.

Capellas said he consulted with a number of big customers before committing to Itanium. "Frankly, I was blown away by how positive the response was," he said. Compaq evoked considerable customer ire in 1999 when it said that it was moving all of its Windows-based servers onto Intel chips and would no longer support NT on Alpha. The company was ultimately forced to spend more than $150 million to help customers make the switch. Observers say forcing Alpha customers to move to Itanium carries similar risks. "They tend to be very fanatical, so if they have to look at a new platform they might take the opportunity to look at Sun," says Technology Business Research analyst Lindy Lesperance. Compaq will ship its first Itanium-based systems in the fall, when it plans to introduce ProLiant servers based on the chip.