Itanium sales slow; users may wait

Hewlett-Packard Co. (HP) asserted its Itanium bragging rights Thursday, boasting it is the leading seller of workstations using the chip from Intel Corp., but analysts put a damper on the company’s claims, saying Itanium sales are few and far between.

In addition, analysts said users might not buy servers or workstations based on Intel’s new chip in great quantities until 2003, when Intel is expected to release the third version of the 64-bit chip, named Madison.

During the third quarter of 2001, hardware vendors sold a grand total of 1,135 Itanium-based workstations, with HP accounting for 650 (57 per cent) of those units, according to Kara Yokley, workstation research analyst at International Data Corp. (IDC), in Framingham, Massachusetts. IBM Corp. sold 385 workstations and Dell Computer Corp. and Silicon Graphics Inc. each shipped 50.

Overall, hardware companies shipped 346,846 workstations in the third quarter, according to recent numbers from Dataquest Inc., a unit of Gartner Inc.

What makes the lackluster sales even more disheartening is that the two companies banking on the future of Itanium – Intel and Microsoft Corp. – may have purchased as much as 80 per cent of the workstations sold in the third quarter, Yokley said.

“Intel and Microsoft are the No. 1 buyers of Itanium to date,” she said. “They are pretty much the two major customers for Itanium.”

Only “a handful” of customers bought the remaining Itanium servers not scooped up by Intel and Microsoft, said Gartner Dataquest workstation analyst Pia Rieppo.

“Sales are very limited right now,” Rieppo said. “It is a very small market.”

Users are waiting for more applications to arrive for the platform and for the cost of Itanium-based hardware to come down, analysts said. In addition, performance has not met expectations. Some Intel Pentium 4 chips outperform the first-generation Itanium on certain applications, IDC’s Yokely said.

HP, however, claimed a diverse set of companies have purchased Itanium workstations, as companies look for an Intel-based alternative to the high-end Unix servers sold by the likes of IBM and Sun Microsystems Inc.

“The units are spread out among many companies,” said Barry Crume, business product manager for Itanium workstations at HP.

Crume said that “dozens of people” had purchased the workstations, as they look to develop software for the Itanium architecture. Software that currently runs on Intel’s 32-bit chips must be reworked to run on the new 64-bit chips.

Most analysts and hardware vendors had expected slow sales of Itanium hardware at first. Most industry pundits looked for the second-generation McKinley chips, which should have much higher performance levels, to push Itanium sales along.

However, McKinley may no longer be the target for most users, given the lack of momentum the Itanium platform has at this time. Companies may now start looking to the third-generation Madison chips coming in 2003, analysts said.

“So far, customers’ reactions have been pretty lukewarm around the first-generation chips,” IDC’s Yokley said. “Now that they have seen (the first generation), they will wait to take a look at McKinley before deploying. We might not see any large deployments until Madison.”

HP had urged customers to begin testing first-generation servers now and make large purchases when McKinley comes out. As it turns out, most users may begin testing Itanium with the McKinley generation of chips and not make large purchases until Madison arrives, analysts said.

Hewlett-Packard, in Palo Alto, Calif., is at