Intel Claims New Server Chip Can Handle Any Workload in the World (INTC, ORCL, HPQ, IBM, MSFT, RHT)

At yesterday’s launch of its newest Xeon processor, an Intel Corp. (NASDAQ: INTC) executive claimed that there is no workload in the world that the Xeon cannot handle. That may be good news for the Xeon line, but where does it leave the company’s top-end Itanium processor?

Late last month, Oracle Corp. (NASDAQ: ORCL) announced that it would no longer continue software development for the Itanium processor because the chip was nearing the end of its life.  Intel officials denied the charge, and Hewlett-Packard Co. (NYSE: HPQ), Intel’s largest customer for Itanium, added its own comment, accusing Oracle of anti-customer behavior as they move to shore up their failing Sun server business.

Intel’s roadmap for Itanium includes two future products, the first of which is due in 2012. Competition at the high-end comes from Oracle’s Sun SPARC processors and the Power7 processor from IBM Corp. (NYSE: IBM). It’s not to difficult to figure out why Oracle would stop developing for the Itanium platform, given its new interest in hardware. But both Microsoft Corp. (NASDAQ: MSFT) and Red Hat Inc. (NYSE: RHT) had already canceled development of new software for Itanium.

H-P, co-developer with Intel of the Itanium chip, does not want to toss the Itanium. The Wall Street Journal reports that an H-P executive pointed out the mature features of the Itanium and the special chips and software designed by H-P that offer even higher levels of reliability than Xeon-based servers.

The WSJ goes on to note that according to IDC estimates Intel sold just 125,000 Itanium processors in 2010, compared with 14.55 million Xeon processors. Itanium is barely a rounding error if these figures are accurate.

Intel could be on the verge of warning on earnings, but not due to slow sales of Itanium.  The chip-making giant has failed to compete strongly in the smartphone/tablet market, which is growing faster than the market for desktop and laptop PCs. The company’s acquisition of Infineon Technologies’ wireless chip unit last August has so far produced nothing of note.

Whatever Intel plans to do with its Itanium processors won’t affect the company’s revenue or profits by very much. One possibility is that it could sell the Itanium to H-P, although it’s likely that such an offer has already been discussed and rejected by H-P. After all, what does it have to gain by owning Itanium? H-P is far better off having Intel, or some other buyer, messing with the silicon.

Intel shares are up slightly shortly after this morning’s opening, to $19.77, with the stock’s 52-week range of $17.60-$24.37.

Paul Ausick