Sun hopes new chip vaults it back into the processor game

SAN FRANCISCO -- Sun Microsystems is set to announce the first of a new generation of processors for computer servers today that the company says offers faster performance with far less energy use.

Sun Microsystems, once a high flier in Silicon Valley, hopes that the new chip, called the UltraSparc T1, will help it win back the market share it lost to higher-performing yet less expensive Unix servers the last few years.

The chip, code-named Niagara while in development, is designed for a specific niche of the Unix-based server market: high-volume Web service operations, like those at Google and eBay. Sun has not yet announced the specific server models that will use the new chip, but the company's executives said the servers would be available before the end of this year, several months ahead of the original schedule.

Sun, based in Santa Clara, Calif., is hoping the new chip will restore the high profile of its core Unix-based Sparc server line, which still accounts for a majority of its revenues.

While the overall Unix server market has been growing -- it increased 6.6 percent, to $4.2 billion, in the second quarter of 2005 from a year ago, according to the Gartner Inc., a technology research and consulting firm -- Sun's overall share has been falling, from 38 percent to 33 percent in the second quarter of this year. Hewlett-Packard's market share remained about the same, and IBM's grew slightly.

The UltraSparc T1, following a trend in the semiconductor industry, adds new features that conserve energy significantly, which could translate into huge savings for Web services companies. Sun's announcement comes just a month after Google said it would expand its use of Sun equipment, though neither company has provided any details about their plans.

The UltraSparc T1 has eight processing cores, each able to execute four instruction sequences, called threads. As a result, the chip includes the same processing power and features of an entire network server, said Greg Papadopoulos, Sun's chief technology officer.

"It's really a race to the death for the microprocessor," Papadopoulos said. "The systems are being placed on the chip."

Sun has invested heavily in developing innovative new servers and server processors in the last few years as it has struggled to regain its business momentum. In September, the company announced a revamped server technology called Galaxy for the lower-end market.

"Now it's all about Sun as a big R&D shop trying to monetize its investments," said Brent Bracelin, an analyst who follows Sun for Pacific Crest Securities. He has an outperform rating on Sun stock. "Hopefully, at some point we'll start to see the dividend, but that hasn't happened yet."

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