IBM breathes life into Itanium ecosystem

At POWERful cost?

The Itanium processor has a dirty secret, and it's buried in Armonk.

The one Itanium vendor with the most to lose from the processor's existence is showing the most dramatic growth in Itanium server sales. In the first quarter, IBM set a company record for Itanium server sales, shipping 1,113 systems, according to Gartner. That figure is up from the desperate total of 29 units in the first quarter of last year.

IBM barely mentions its two-processor x382 and four-processor x455 Itanium servers. In fact, the first item returned in a search for "Itanium server" on IBM's web site is a study declaring that Linux running on IBM's own Power processor is a much cheaper option than Linux running on Itanium, UltraSPARC or Xeon processors. IBM makes solid money promoting Power and isn't about to give Intel's 64-bit behemoth public credit.

That said, IBM is now the second largest Itanium vendor. Its sales have risen from the 29 units in the first quarter of 2003 to 2 units, oops, in Q203 and to 148 units in Q303. But the real jump came in the fourth quarter of last year when IBM shipped 1,082 Itanic boxes, leading in to last quarter's total of 1,113. Quite a leap!

In reality, however, the success of IBM's Itanium business is an interesting side-attraction for what is a carnival gone wrong.

As mentioned last month, a grand total of 6,281 Itanium servers were shipped in the first quarter at an average selling price of just $45,000 each. This meager amount of sales might not be so bad for the "Itanium ecosystem" if it were not for HP's total domination of the market. HP accounted for 4,425 of these sales, according to Gartner.

And this figure would not be so bad for HP if it were not for the sequential decline in its own Itanic shipments. HP shipped 4,993 Itanium systems in the fourth quarter of 2003. Higher fourth quarter sales are to be expected as vendors' look to close year-end deals, but any decline is bad news for a "bet the company" product. HP receives top marks for a year-over-year surge from the 1,135 systems shipped in the first quarter of 2003. Still, not even Merrill Lynch's Steve Milunovich would be gullible enough to bet a company on these types of volumes.

What scraps did HP and IBM leave for the rest of the ecosystem?

Well, Dell managed to move 271 Itanium servers in the first quarter of 2004. That's a nice jump from the, um, 15 shipped in last year's Q1 but a decline from the 314 shipped in Q4. One can only imagine how many employees Dell dedicates to handling Itanium sales. Not quite the number that the volume icon is used to. Nonetheless, Dell this week released a new four-processor Itanium box. Back to work, Bob.

NEC is the fourth-place Itanic powerhouse with 130 boxes moved in the first quarter of this year. Again, this is a stunning gain over the, cripes, 4 systems shipped in the same period last year and 55 moved in the fourth quarter of 2003.

SGI - another bet the company on Itanic firm - managed to pump its first quarter totals up to 110 units shipped. That's a rise over the, dear lord, 33 boxes moved in last year's Q1 and a slight gain over the 98 systems shipped in the fourth quarter. SGI does, however, tend to ship larger systems than most of the Itanic vendors, so it might be pulling in a bit more cash than close rivals.

All told, the Itanic market still looks quite unhealthy. The chip was always billed as an industry-standard part, but three of the largest server vendors in the world are managing but 500 total shipments in the best quarter of the chip's history. And that's with RISC switching "incentives" in play.

Wouldn't it be something to see IBM pull its Itanium systems off the market all together and cull the ecosystem by close to 20 percent? It's not a likely scenario, but would help pull IBM out of a rather awkward position. At the moment, IBM is the only thing stopping Itanium from looking exactly like the PA-RISC/Alpha replacement many suspect it is. If there is an Itanium ecosystem, it's IBM's fault - a stigma that brings little financial gain for the company. ®

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