SAN FRANCISCO (Reuters) - Hewlett-Packard Co.HWP.N will unveil on Tuesday "blade" computers that fit onto cards stacked like books on a shelf and could replace the less-efficient racks of machines and tangles of cable now standard for many corporations, executives said.

HP's systems, the first by a major network computer maker, could be cheaper to run and house more than current low-end servers, and analysts say they may become a multibillion dollar offering in a matter of years but caution the slow economy could stifle early demand.

The blades, each a separate computer, miniature storage system or other network part, slide into slots in a chassis which provides power, connections and protection, replacing rack-mounted boxes as the trimmest computers on the block.

Vendors say blades will make networks easier to manage and take up less space at companies that devote small computers to individual tasks, like telecommunications companies or Internet web-hosting centers.

News source: Reuters


The slow economy and Hewlett-Packard's planned merger with Compaq Computer Corp.CPQ.N, which plans to bring out its own blade system next year, raise questions about how fast corporations may adopt the technology, analysts said.

But they said HP's blades, priced at about $1,925 per server, would be a strong opening entry in a market that International Data Corp. estimates could reach about $4.5 billion by 2005.

Competitors Compaq, Dell Computer Corp.DELL.O and International Business Machines Corp IBM.N all plan to announce blade products next year, and Sun Microsystems Inc.SUNW.O has said it is working on a response, as well.

Hewlett-Packard plans to start shipping blade servers with Intel Corp.INTC.O Pentium III microprocessors running the Linux operating system in January and will offer blades running Microsoft Corp.MSFT.O Windows two or three months later.

HP's own HP-UX operating system and PA-RISC processors will be adapted to blades toward the end of the first half, executives said.

HP also is expected to announce a string of technology companies that support its standards and could turn out blades or components that hook into HP systems.

Those include chip makers Advanced Micro Devices Inc. AMD.N, Intel and Transmeta Corp.TMTA.O, storage networking provider Brocade Communications Systems Inc.BRCD.O, and software developers Microsoft, Oracle Corp.ORCL.O and RealNetworks Inc.RNWK.O among others.

"Building that kind of partnership base is going to be key for getting a share of that market as it begins to take off in the 2003, 2004 time frame," said Mark Melenovsky, an analyst at IDC, who saw the partners as one of HP's main advantages in being first to market.

He said that the low-end server market was beginning to come out of a slump and that corporations would be lured to blades by their ease of use and low costs, including space and power requirements.

"Hardware represents a really small percentage of the outlay for all this infrastructure," he said. "What the blades really talk to is people costs."

Mark Hudson, an HP worldwide marketing manager, said the simplicity was intuitive for potential buyers. "You can sort of see this click with customers," he said. "They get it."

Yankee Group analyst Jamie Gruener also gave HP credit for building support for its standard but said corporations were still skittish of buying new technologies in the weak economy.

"You really face the challenge of getting customers to deploy this new architecture, and I think in the short term it is going to be an uphill battle for anyone," he said.

It is also unclear how much blades will cut into sales of other low end server systems -- an area in which HP is relatively weak -- and what would happen to HP's blade servers if it merged with Compaq.

"It is going to be an interesting dynamic to watch how the integration occurs between HP and Compaq, especially in light of the fact that Compaq has been a market leader, especially in the Intel space," said Gruener.

HP executives, forbidden by anti-trust law from commenting on products at this stage in the merger process, said customers would be taken care of in any case.



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