informa
/
News

Analyst: Intel's Itanium Chip Will Hurt Sun Most

Analyst says Sun Microsystems will lose share in the server market because of Intel's 64-bit Itanium chip.
There's more bad news for Sun Microsystems. One day after the company again set lowered revenue and earnings forecasts for the current quarter, an influential technology analyst said Intel's new 64-bit Itanium chip will cost the company "a significant loss of share within 2 to 3 years" in the server market.

In a research report issued Wednesday morning, US Bancorp Piper Jaffray analyst Ashok Kumar notes that all major Unix server vendors, with the exception of Sun, will offer their customers Itanium-based systems in addition to their proprietary offerings. Intel officially unveiled Itanium Tuesday after nearly two years of delays. At the same time, Compaq, Hewlett-Packard, and IBM, as well as PC-maker Dell Computer, announced systems based on the new chip.

Though most vendors haven't set pricing, officials at those companies have indicated in interviews that their Itanium-based products will sell for tens of thousands of dollars less than even Sun's mid-range products. For instance, a fully configured version of Dell's PowerEdge 7150 server with four 800-MHz Itanium processors will likely sell for between $40,000 and $45,000, say Dell officials. By comparison, Sun's Enterprise 3500 server, with four 400-MHz UltraSPARC modules, comes in at more than $90,000.

In his report, Kumar, often one of Intel's biggest critics, suggests Sun should give up its resistance to using third-party processors. "The major loser in this transition is Sun. Sun is the only major server vendor that's continuing to use a single-track strategy, offering only its proprietary SPARC platforms and its proprietary operating system," Kumar says.

For their part, Sun officials say the tight integration between SPARC chips and the company's Solaris OS adds up to better reliability and value. "You have to look beyond the price of the box and consider total cost of ownership, which is where we excel," says Chris Kruell, group marketing manager for computer systems at Sun.

Sun said Tuesday that it expects fiscal fourth-quarter revenue to fall between $3.8 billion and $4 billion, compared with $5 billion in same period last year and $4.1 billion in the third quarter. Sun also said it now expects earnings per share for the quarter, ending June 30, of 2 cents to 4 cents, excluding one-time events. Analysts surveyed by Thomson Financial/First Call had been expecting per-share earnings of 6 cents. Sun blames much of the shortfall on weak sales in Europe.