HP Girding Its ProLiant Loins for Battle in 2004

by Timothy Prickett Morgan

When you are the volume leader in the worldwide server market, it is hard to stay in that position and it is harder still to grow. At some point, any big player hits the limit of large numbers, where an increase in market share comes with diminished marginal returns in terms of sales or profits. But if you ask Brad Anderson, general manager of Hewlett-Packard's Industry Standard Server Group, if he thinks HP has all the market share it thinks it can get, he will say no. Emphatically.

While HP can't talk about the current fiscal quarter right now, which would be interesting, Anderson did say in an interview this week that the fourth fiscal quarter ended in October was a record-breaking one for the ProLiant server product line. For one thing, HP sold the 8 millionth ProLiant server in the quarter, and has about 3 million to 4 million of those machines in the field, making that installed base the biggest server base in the world. Anderson also said that the company has shipped over 50,000 of its ProLiant BL blade servers in the two years since volume shipments started, giving it the largest market share.

What Anderson did not say is that IBM started later with its BladeCenter blade servers and is coming on pretty strong. Only last week, IBM announced a skinny four-way blade server, the HS40, that is considerably denser than the BL40p that HP has been peddling. IBM can cram seven four-way blades into a 7U chassis, while HP can only get two four-way blades in a 6U chassis.

"We think density almost becomes a gimmick at some point," said Anderson. He added that HP was more worried about having the right features in the blades, like more slots, more memory, and redundant cooling and power--the things that its customers were asking for. HP has been selling four-way blades for a year, while IBM doesn't get started until February 13. "We're monitoring the differences between IBM and HP blades, but we will probably diverge in our directions."

While not giving away any HP state secrets, Anderson said that the two-way BL20p and four-way BL40p blades would be enhanced, more than likely with the kickers to the Xeon DP and Xeon MP processors that Intel is starting to talk about this week. A kicker to the "Prestonia" Xeon DP (which has two-way SMP support) is expected around mid-2004, while a kicker to the "Gallatin" Xeon MP (which has four-way SMP support) is expected in late 2004 or early 2005. Both chips will present difficult thermal and acoustic challenges, and Anderson says that is where HP is focusing its attention right now.

One of the things that HP will not be doing is revamping the ProLiant BL10e entry blade server, formerly known as "QuickBlade," with the Transmeta Efficeon processor. HP has rejiggered the BL10e chassis, which used the Pentium III low-voltage processor to run up to 20 skinny Windows and Linux servers in a single chassis, as a so-called "blade PC" running Windows XP. The blade PC is based on the Efficeon, which has some interesting thermal properties, but Anderson says that HP is not planning on launching a server version of the Efficeon blades. Customers just are not--as yet--interested in efficient, single-CPU servers. This could change when someone starts looking at the electric and HVAC bills.

Another thing that HP is not going to do is launch ProLiant or Integrity servers based on Opteron processors from Advanced Micro Devices. "AMD is not on our current roadmap," said Anderson. "But I have learned to never say never. If HP did use AMD, it would be because it enabled us to get better 32-bit performance compared to Intel's Xeons." There you go, AMD. Now you know what you gotta do.

HP will also this year start sunsetting the tc Series of entry servers that HP had before the Compaq acquisition and kept alive to appease the HP channel. HP has correctly seen that it needs to have all 32-bit X86 machines under the ProLiant umbrella, and has launched the ProLiant 100 series to attack the uniprocessor and two-way entry server market where high-end features are not as important as low prices and raw power. The first of these ProLiant 100 machines was a two-way box called the DL140, which was launched in early November 2003 and which is based on the Xeon DP. The tc2120 is a Celeron and Pentium 4 uniprocessor box that HP needs to replace with a ProLiant 100 tower server, and Anderson says HP will do this some time in the first half of 2004. A rack version of the machine is also a logical thing to expect.

As for the core two-way and four-way ProLiant DL and ML servers, Anderson says that there is a lot of stability in these products right now, based on Intel's product cycle. The Xeon MP machines are very stable--meaning don't expect a lot of changes--but the Xeon DP machines will have some subtle changes, according to Anderson. He would not say what they might be, but adopting 2.5-inch SCSI drives is not likely to happen until 2005, so that is not it.

HP's main focus in 2004 when it comes to 32-bit X86 servers will be to close any price gaps with Dell, particularly on low-end machines, since customers are making buying decisions based on very small differences in server prices--sometimes as low as $100 on machines that cost thousands or tens of thousands of dollars. Anderson said that closing the price gap with Dell, particularly in Europe, was a priority, and that on most configurations the Dell price advantage was only about 10 percent right now. By getting price parity, HP can thus gain a bigger share of new customers, which comprised somewhere well north of 20 percent of ProLiant sales in 2003. We guessed 20 percent, and all Anderson would say is it was "well north" of that figure. If HP is bringing this much new blood to the ProLiant line, it is clearly doing something right, even with all of the challenges it faces from Dell and IBM in the U.S. and Europe, Fujitsu-Siemens in Europe and Asia, and Legend and LangChou in China, who have been growing entry server shipments faster than HP.