Arik Hesseldahl

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Intel Revamps Xeon as the Server Chip for "Any Workload in the World"

Intel announced a big batch of new server chips under its Xeon brand today, all of them aimed at high-end applications like mission-critical servers used in data centers.

Intel used its usual hyperbole to describe the big step forward it has taken with with Xeon E3 and E7 families of chips. In one slide of its presentation deck to reporters on a conference call today, it said that 18 racks of 2006-vintage servers using its dual-core chips from back then could be replaced by a single rack full of servers using its newest Xeon E7-4800 chip. Swapping out the old servers for the new ones would also cut the annual energy cost by 93 percent.

The refresh is part of Intel’s bid to go after the $15 billion ultra-high end of the server market, where powerful, expensive and often very customized machines running IBM Power7 chips or Oracle/Sun SPARC chips hold sway. But here’s where the shifting sands of semiconductor politics get a little complicated. For years, Intel has coveted this market and had planned for a very long time and spent billions on designing and building its Itanium chip to go after the big iron.

Remember last month when Oracle said it would stop building software that supports Intel’s ultra-high end Itanium chip? The kerfuffle that followed included rebuttals by Intel and Hewlett-Packard. Finally, Oracle had the last word, saying in effect that Intel wasn’t being entirely honest about its plans and that in fact it eventually planned to kill Itanium in favor of its higher-volume Xeon chip. (While Oracle happily buys lots of Intel’s Xeon chips for its Sun servers, the real target in all this was HP, which is for all intents and purposes the only company selling Itanium-based servers in meaningful numbers and one competitor Oracle has been taking every opportunity to disparage.)

With memories of that three-way scrum still fresh, it was no surprise at all to hear Kirk Skaugen, VP of Intel’s Data Center Group, defend Itanium, reminding reporters and analysts assembled for the launch event today that the anniversary of the Itanium chip’s release in 2002 is coming up on May 29. He then went on to defend Itanium and score points againt Intel rival AMD in one breath, saying that the Itanium ecoystem, constantly criticized for being much smaller than Intel initially envisioned, amounted to about $4 billion in server sales last year, bigger than the $2.8 billion in sales of servers running AMD chips. He then reiterated Intel’s promise to keep development of Itanium chips on track: Poulson and Kittson, code names for future Itanium chips, are in the pipeline for release.

Yet even after all that, it was hard not to side with Oracle’s interpretation of the situation. The key moment came when Skaugen said, “There’s no workload in the world that Xeon can’t handle.” Hmm. Does that mean a Xeon chip could in some scenarios replace an Itanium?

Confused, I turned to Dean McCarron of Mercury Research, an Arizona-based outfit that tracks the market for x86 chips (chips used in PCs, servers and workstations manufactured by Intel, Advanced Micro Devices and VIA Technologies).

Years ago, he said, there wasn’t much that differentiated a Xeon server chip from a Pentium used in a PC. But over the years that’s changed. “Xeon has grown up,” he said. Many of the features that Itanium included as suitable for specific tasks have migrated down the line and into Xeon chips. “While there’s still a lot of cases where an Itanium is the right choice for the customer, the fact is that over time Xeon has gotten better and is able to fit into more segments of the server market.” There may be some cases, McCarron said, where a customer who would have insisted on an Itanium a few years ago might be more willing to consider a less expensive Xeon.

Here’s what may be going on. McCarron told me that Intel’s share of the market for server chips stood at 93.4 percent at the close of 2010, while AMD’s stood at a paltry 6.6 percent. In a market where one percentage point amounts to about 50,000 servers–which on average contain roughly two server chips each–Intel’s Xeon is in need of new territory in which it can grow. By definition, that means attacking the market for big iron where systems running IBM’s Power7 and to a lesser extent Oracle’s Sun SPARC chips dominate. This will also mean Intel will bump into itself: Xeon will probably eat into Itanium’s business. That’s going to take some complicated, nuanced positioning.

As Skaugen put it today, just before his more memorable line about Xeon being able to handle any workload in the world, he said the coexistence of Xeon and Itanium is one of choice. Xeon, once positioned at the lower-cost-but-higher-volume end of the server market, is now, as he put it, “side by side” with Itanium. What’s unclear is how much longer that will continue. Expect Intel to shed more light on this at its developer forum in Beijing later this month.

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The problem with the Billionaire Savior phase of the newspaper collapse has always been that billionaires don’t tend to like the kind of authority-questioning journalism that upsets the status quo.

— Ryan Chittum, writing in the Columbia Journalism Review about the promise of Pierre Omidyar’s new media venture with Glenn Greenwald