Intel And Friends To Invest $10 Billion In Itanium

Intel's Itanium chip has been struggling in the market, with three of the four largest server makers choosing not to build systems based on the processor. But the high-end processor architecture will not fail due to lack of financial support. Intel and a group of technology companies that includes Hewlett-Packard on Thursday pledged to spend $10 billion over the remainder of the decade to support Itanium.

Originally envisioned by Intel and co-designer HP as a technology platform that would supplant x86 chips as a mainstream processor architecture, Itanium has since been rescaled to target "mission-critical" server applications, the same market currently served primarily by IBM's Power and Sun Microsystems' Sparc processors.

"The marketplace is looking to go through a transformation over the course of the next several years, which is really why we are investing," says Carol Barrett, director of enterprise platform marketing for Intel. "We think we have critical mass behind us and exciting opportunities coming to us in the future."

Intel declined to provide specific Itanium shipment numbers, but according to IDC unit sales of Itanium-based systems totaled less than 9,000 in the third quarter of 2005. Those numbers pale compared to larger x86-based server market. But the high-end servers that use Itaniun offer opportunities for higher revenue as compared to the more commoditized x86 market.

Itanium sales are strong when compared to sales of other RISC-based processors at similar points in their early history, Barrett says. Itanium platform revenue currently totals 58% of Sun Sparc revenue and 33% of IBM Power revenue, she says. In addition, more than 6,000 applications are currently available to run on Itanium-based systems.

While both Dell and IBM withdrew support for Itanium early last year, Itanium systems are now being used in 70 of the world's 100 largest companies, up from 40 a year ago, she says.

Intel has already invested billions of dollars in Itanium, and the company declined to say what percentage of the latest $10 billion investment it would be providing. The investment is worthwhile, the company believes, because the mission-critical server market addressed by Itanium represents a $140 billion hardware opportunity over the next five years, and nearly 60% of the installed hardware in the segment is three years old or greater.

The funding is being provided by the Itanium Solutions Alliance, which was announced in September. In addition to Intel and HP, it includes other equipment vendors such as Bull, Fujitsu, Fujitsu-Siemens, Hitachi, NEC, SGI, and Unisys. The $10 billion investment will used for research and development efforts by Intel to improve the processor architecture, by the hardware vendors to expand and advance server platforms, and by software vendors to create new applications, compliers, and tools to support Itanium.

The next big step for Itanium will come mid-year, when Intel is scheduled to introduce its first dual-core versions, which are code-named Montecito. They will also integrate Intel's Virtualization Technology. The Montecito processor will provide twice the performance and 2.5 times the performance per watt than the existing Itanium processor, Barrett says.