Micron Pulls The Plug On Servers

Micron Electronics Inc. is getting out of the server-making business and will instead sell co-branded systems from Hewlett-Packard. Micron execs say the move is in part an acknowledgement that, with a customer base largely limited to small and medium-sized businesses, the company lacks the volume required to compete as an original equipment manufacturer in the low-margin, Intel-based server market. "There are a number of areas where our efforts would be much better spent," says Paul Petersen, Micron's VP of product marketing.

Micron will instead sell four HP NetServers ranging from the 2u NetServer LPr appliance to the LH 6000 departmental and database server. Micron will sell them at its Web site. For technical support, Micron says it will remain the first point of contact for its customers. In some cases, however, it may dispatch HP technicians to resolve problems. Both companies also subcontract support to Unisys.

Micron's exit from servers is somewhat of an about-face. Three years ago, the company bought NetFrame Systems with an eye to establishing a stronger presence in the market. However, Micron was unable to make significant inroads against market leaders Compaq and Dell Computer. Analysts say the company's 1% U.S. market share couldn't justify ongoing R&D and manufacturing expenses. "They just don't have the economies of scale that you need in that business," says Brooks Gray, Technology Business Research analyst. As of the first quarter, Micron ranked seventh in PC-based server sales, according to International Data Corp.

Micron plans to continue making a range of PCs and notebooks. Also today, it introduced its Millennia Max XP model, one of the first commercial desktops to use Double Data Rate memory at the system level. DDR enhances memory throughput by virtue of a higher internal bandwidth than standard SDRAM. The Millennia Max XP features a 1.2-GHz AMD Athlon processor that is DDR compatible by virtue of Advanced Micro Devices' new 760 chipset.