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Sun's Super Servers

High-tech companies that handle millions of online transactions a day need computers that will carry out those tasks more quickly and efficiently. In a bid to meet that need, Sun Microsystems (SUNW) on Dec. 6 introduced servers based on its multi-core UltraSparc T1 processor, code-named Niagara.

After 18 months of build-up, the machines put Sun at the cutting edge of one of the chip industry's biggest trends: the use of so-called multi-core systems. While Intel (INTC), IBM (IBM), and AMD (AMD) have chips that are laid out to create two separate processors, the T1 boasts eight such cores embedded in the circuitry.

Since each core can process four types of software, that's 32 jobs it can handle simultaneously -- while consuming far less power than standard servers require. "The performance numbers look good to me, and the power consumption is reasonable -- as opposed to unreasonable with many other servers," says Kevin Krewell, editor of The Microprocessor Report, a trade publication.

FREE LICENSE. The larger significance, says Sun Chief Executive Scott McNealy, is that the Niagra chip is the first processor designed from the ground up for the so-called Web 2.0 era, when big corporate IT shops and Net companies process myriad functions -- be it e-mail, stock trades, or online auctions -- in an instant.

"Name another chip that was designed to handle this kind of Web load," says McNealy. "There aren't any." He claims the chip will operate seven times more efficiently than rival servers. "I've been in this business for a quarter century, and most of the time we're fighting for a 5% price-performance advantage. I've never seen anything like what we're seeing with this box."

At a Manhattan press conference, Sun announced it would also license the chip free of charge so other manufacturers could create versions of it for use in non-Sun servers. The goal: Just as Sun is giving away much of its software to spur interest from software developers, giving away this chip design could create a larger market for Sparc-based computers.

NOT BIDDING YET. These days, Sun needs all the good news it can get. The company's stock, trading around $4 as of Dec. 6, has barely budged in three years. Despite massive strategic shifts, it continues to lose share in the overall server market to larger rivals. Sun also missed Wall Street's consensus profit estimates by 6% in the most recent quarter (see BW Online, 12/2/05, "McNealy: Why 'Sun Is Back'").

But will these Niagara-based servers -- the $3,000 T1000 and the larger $7,800 T2000 -- be a panacea? Not anytime soon. At least at first, they're a fit for only a slice of the $50 billion server market. They handle high-tech busywork like calling up Web pages, but not computationally intensive jobs like crunching through big databases.

And while executives from eBay (EBAY) were on hand at the Manhattan press conference to sing the machines' praises, the online auctioneer hasn't yet committed to actually using the machines. eBay's Paul Kilmartin, who specializes in hardware infrastructure, says the servers should be light-years more energy efficient than other servers. That's a huge advantage, given the high price of electricity and the difficulty of getting sufficient power into its sprawling data centers containing tens of thousands of machines. So how come eBay is still in tire-kicking mode? "We're getting used to the notion of using them, but we're not going to put a product in beta in front of millions of consumers," says Kilmartin.

"VIAGRA CHIPS." Rivals are quick to ladle big helpings of fear, uncertainty, and doubt onto the new machines. Karl Freund, vice-president of IBM's UNIX server division, derides the Niagara processor as "Viagra chips. But Viagra might have more staying power." Freund argues that Niagara lacks enough on-chip cache memory to handle anything but the simplest jobs -- most of which are already handled well enough by cheap Linux-based Intel machines.

"Most data center managers aren't really concerned about trying out new technologies to replace their Web servers," says Freund. "Those machines are like the toaster oven of the computer industry."

And Stephen Dewitt, a former Sun executive who now runs server startup Azul Systems, says Sun's new servers are "kind of an evolutionary step forward" but that they don't hold a candle to his own company's products. Azul makes a new kind of server that crams up to 24 separate processor cores onto a single chip, three times the number on the new Sun servers. "Sun is a [product] generation ahead of [IBM, Hewlett-Packard (HPQ), and Dell (DELL)], but I certainly don't think you can compare it to what we do," says Dewitt.

REVAMPED HARDWARE. Ever optimistic, McNealy is undeterred by the naysaying. Development of the machines finished months ahead of schedule, and Sun is "already making them as fast as we can," McNealy says. He expects to ship 5,000 to 10,000 units this quarter, and says the profits should be goodl. That's because the machines use the same basic hardware found in the existing Galaxy line of servers. Many servers require their own technology from stem to stern.

Customers such as eBay and holders of Sun stock are hoping McNealy's optimism is well founded.

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