Sun Microsystems and Intel in alliance

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Sun Microsystems and Intel, often bitter rivals in the microprocessor industry, on Monday announced a “landmark alliance” in which Intel’s chips would power a Sun server product line.

Jonathan Schwartz, Sun chief executive, described the partnership as an historic moment that would change the market for his company.

In a joint press conference with Paul Otellini, his Intel counterpart, he said Intel had agreed to distribute and support Sun’s Solaris operating system as part of the deal.

The announcements were a blow to Advanced Micro Devices, Intel’s processor rival, which has kept Intel’s chips out of Sun’s servers for several years.

The move by Sun signalled that Intel was regaining a technological edge it had lost to AMD, along with market share, in the server segment of the industry.

Sun said it would begin using Intel’s Xeon processors in the most common “x86” servers late in the first half. It uses its own processor in more high-end servers where it competes with Intel’s Itanium product.

Sun is rated sixth in market share in the x86 segment, but it has been one of the fastest growing vendors over the past few quarters.

Sumit Dhanda, Bank of America semiconductor analyst, said in a note predicting the move that Sun had used AMD’s Opteron processors exclusively over the past few years because they had used less power than Intel’s Xeon.

“Now that Intel’s new Xeon processors are boasting better performance/power consumption versus AMD’s Opteron (based on 3rd party benchmarks), we believe that Sun, among many other server vendors, is exploring use of Intel processors in its x86 server line,” he wrote.

Regaining Sun as a customer is Intel’s biggest win since it persuaded Apple to switch to its processors in 2005.

Intel last week beat market forecasts when it announced it had delivered revenues at the top end of its expectations in the fourth quarter helped by higher selling prices for its new line of microprocessors.

In contrast, AMD issued a profits and revenue warning earlier this month, blaming lower average selling prices. It releases its fourth-quarter figures after the markets close on Tuesday.

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