Compaq And HP Launch Competing Server Blades

If planned merger goes through, combined company will likely phase out one server line
Despite their pending merger, Compaq and Hewlett-Packard are working on competing products for the emerging server blade market. HP last week launched the Blade Server bc1100, powered by a new Intel subsystem that features a low-voltage Pentium III Tualatin processor. Meanwhile, Compaq says it will launch Intel-based ProLiant BL blades early next year.

Dell Computer and IBM are expected to introduce similar products later next year after Intel launches a more robust version of its low-voltage architecture. Server blades--essentially an entire server resting on a single board--will represent a $2.9 billion market by 2005, according to research firm International Data Corp.

Michael Winkler

Products that are phased out will get support, Winkler says.
Under a push Compaq calls adaptive infrastructures, the vendor is also readying software and hardware that will make it easier for users to remotely control Intel-based servers, including blades; load software images on numerous servers simultaneously; and automatically detect and fix component failures.

HP's server blades initially will run exclusively on Linux, but Windows and Unix versions will be available in the first half of next year. Each Blade Server bc1100 can be combined with up to 36 other blades in a chassis. HP officials say the architecture is ideal for space-constrained data centers. The chassis, with one blade, sells for $7,525, and additional blades are priced at $1,925.

Government rules require HP and Compaq to continue to compete with each other until their merger is complete. Following the deal's consummation, expected by mid-2002 if not derailed by shareholders or the Justice Department, analysts say it's likely that the new HP will phase out one Intel-based server line. But Michael Winkler, executive VP for Compaq Global Business Units, says that shouldn't be a concern for buyers. "Regardless of which product side they're on," he says, "we'll take them through the logical end of the product cycle and help them transition to the new product lines."

Still, market watchers say the uncertainty is taking its toll on sales at both companies. Says U.S. Bancorp Piper Jaffray analyst Ashok Kumar, "Since the merger announcement, both Compaq and Hewlett-Packard have seen their competitive positions significantly eroded."

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