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Sun Microsystems and IBM are the two hardware vendors best positioned to capitalize on a second 64-bit computing rush, according to one of the industry's most optimistic analyst firms.

A major shift from Intel's 32-bit processors to x86-64-bit chips from both Intel and AMD is about to occur, and Sun and IBM are set to outpace both HP and Dell as customers upgrade to the beefier chips, said American Technology Research (ATR). In addition, the analyst firm once again picked AMD as the near term winner in the march to x86-64-bit processors given Opteron's jump on the mystery chip Intel is said to have in store.

"We are convinced that the overall importance of this upgrade can't be overstated," writes Mark Stahlman, an analyst at American Technology Research. "The upgrade to 64-bits is the sort of a phenomenon that only occurs once every 15 years. . . Since this upgrade compels a re-building of much of the installed base of both hardware and software, it is likely to open up considerable opportunity for additional market growth as well as share shifts."

"Specifically regarding the rapid adoption of x86-64 products in 2004/05, we believe that those vendors who have most aggressively embraced this market are likely to have the opportunity for share gains. In particular, we note that Sun Microsystems and IBM are the most aggressive and best positioned server vendors in this emerging x86-64 market. Lastly, we expect that AMD's lead over Intel is potentially an opportunity for considerable upside."

ATR is somewhat unique among analyst firms in its unrelenting optimism for a rapid surge in 64-bit computing sales. It's also one of the few firms to dangle a buy rating for Sun shares.

So is ATR right to be such a renegade?

In the near term, backing Sun and IBM in 64-bit computing seems like a no brainer. The two companies along with HP have dominated the 64-bit RISC server market, splitting tens of billions in revenue between them. Of these three companies Sun and IBM appear as the two best aligned to ride early x86-64-bit success.

On paper, Sun is the biggest backer of AMD's x86-64-bit chip. The company plans to roll out a fleet of AMD workstations and serves next year with both Linux and Solaris x86 as operating system options. This lets Sun profit from the popularity of Linux while possibly helping it pave the way for Solaris to be the Unix OS of choice for Opteron SMPs.

IBM is also backing Opteron with a server aimed at the high performance computing market. With its own Power products, Opteron and Itanium systems, IBM has set itself up to profit from any surge in 64-bit server sales.

This leaves HP as the odd man out. The company has put all of its weight behind the slow selling Itanium processor from Intel. HP is asking all of its Alpha and PA-RISC customers to overhaul their hardware and software infrastructures by shifting to Itanium's EPIC instruction set. In addition, its tight relationship with Intel around Itanium likely means HP will be the last major vendor to ship an Opteron product - doing so only if the future of Itanic is as grim as its present state.

If Intel ships a x86-64-bit chip next year, as ATR predicts, the situation won't improve much for HP. Customers will have to choose between Itanium systems or the x86-64-bit kit. It will be tough for HP to guide customers to one product over another. HP is also more dependent on Microsoft than either Sun or IBM, and Redmond continues to delay the release of a x86-64-bit operating system suitable for the low end server market.

ATR has divided the enterprise computing market up into three different "teams" to show how it thinks the next couple of years will break down.

"We detect the building of 'teams' in which vendors enter into complex inter-company alliances - sharing customer data, jointly developing products, collaborating on designs and standards - with the intent of maximizing the overall market share for their team," the firm writes.

The Blue team is captained by IBM with Cisco, AMD and Sony throwing in their lots. The Red team consists of Microsoft, Intel, HP and Dell, and the Green team has Sun and Oracle on its side.

These relationships seem fairly obvious given past ties between the companies, but the point is that a type of consolidation is going on in which the vendors will need to rely on each other more than ever. Should 64-bit computing take off in the next couple of years as ATR suggests, the Red team will have a lot of work to do. HP is the only player in that group with any kind of 64-bit track record, and it's throwing away past success for a future gamble. ®

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