HP and Intel Inject New Life Into Itanium, Ending Lawsuit — For Now
At a joint news conference, Intel first introduced the new chip, dubbed the Itanium 9500. Later, HP — by far the largest of Intel’s six known customers using the chip in servers — announced a new batch of servers in its Integrity line.
The announcements come against the backdrop of a complicated year for HP, Intel and the relationship they’ve had over the Itanium chip. In 2011, HP sued Oracle, a significant provider of database software that runs on Integrity and other Itanium-based hardware, after Oracle declared that it would no longer support the chip with new software.
HP argued that Oracle’s decision violated both a longstanding arrangement to support the Itanium platform and a late-2010 agreement between them that reiterated it. Oracle argued that HP and Intel had secretly planned to end development of the Itanium chip and systems running it, and to then help customers migrate to servers running Intel’s mainstream Xeon server chip. Ultimately, a California state judge ordered Oracle to continue to make Itanium-compatible software. Oracle has promised to appeal.
Rory McInerney, vice president of Intel’s Architecture Group, made a point of noting in his remarks that the chipmaker’s commitment to the Itanium platform is ongoing. “This is a further demonstration of our commitment to this product and to its customers,” he said.
Indeed, Intel announced a new customer for Itanium chips, a Chinese company called Inspur. Other companies that buy Itanium chips from Intel include NEC and Hitachi in Japan, and Bull, a French maker of supercomputing systems.
At HP, the litigation has hurt its once healthy Business Critical Server business. Sales in that unit fell year-on-year by 16 percent to $385 million. On an annual basis, sales in BCS had fallen 19 percent over the last two fiscal years reported from $2.6 billion in 2009 to less than $2.1 billion last year.
HP has been especially hurt not only by a drop in sales of the servers, but by a falloff in very profitable support and service contracts that accompany them. HP doesn’t typically disclose the financials associated with the contracts, but court filings showed that they were responsible for as much as 15 percent of HP’s profits on an EBIT basis as recently as 2009.
At an analysts meeting last month, CFO Cathie Lesjak said HP expects to see “continued weakness” in the BCS business. Just how weak will be made clear when HP next reports quarterly earnings on Nov. 20.
(Image is of a previous generation of Itanium chip known as the Itanium2.)