It Takes More Than a Fast CPU to Rule the Web

Event Summary

NEW YORK and LONDON, May 16, 2000 - Compaq Computer Corporation today announced an aggressive attack on the $32 billion high-end UNIX market with the worldwide launch of its new AlphaServer GS series systems. Targeting dot-coms as well as customers in telecommunications, high-performance technical computing, healthcare and financial services, the new AlphaServers are optimized to support the most demanding e-business applications and customer environments. With over 200 systems already sold, Compaq anticipates $1 billion in revenue from AlphaServer GS series sales during 2000 and expects to double its UNIX market share within target markets in the next three to four years.

"Today's announcement is another significant step in Compaq's strategy to deliver the best Internet infrastructure to our customers," said Michael Capellas, Compaq President and Chief Executive Officer. "With more and more companies facing IT performance bottlenecks and shutdowns, the importance of the infrastructure has never been greater. Analysts estimate that 90 percent of this infrastructure has yet to be purchased - and these demands are causing us to rethink the way systems are architected, designed, developed and deployed. The new AlphaServers, combined with Compaq Services and solutions delivered with our partners, are building a new foundation for the most demanding e-business environments."

Market Impact

First, a disclaimer: we have always been of two minds regarding the former Digital Equipment Corporation (now part of Compaq) and its products. On the one hand, they had excellent technology and high quality, robust products. On the other hand, they "couldn't market their way out of a wet paper bag". It is the latter problem that makes us a little peevish.

Alpha loyalists and especially those who need/want "Big Iron" have been waiting a long time for Wildfire. Compaq talks about Wildfire becoming a major player in Internet infrastructure, but it is not clear that they really intend to go after Sun Microsystems (the current leader) in that regard. Rather, the "focus" appears to be on the traditional strengths of the former Digital Equipment Corporation (DEC) hardware - datacenter, high performance technical computing (HPTC), and "internal" infrastructure (e.g., e-mail, process management). This is not necessarily a bad thing, just a defocusing of the "official" Internet infrastructure effort.

We are concerned that Compaq's current Alpha marketing strategy appears to be utilizing the same logic that failed DEC in the first place - to wit, an overarching focus on "the need for speed". Although CPU speed can be an important consideration (at least in the desktop space), and can help with searching large databases, it is hardly paramount in Web infrastructure. We would have expected Compaq to provide more Web-focused benchmarks such as TPC or SPECweb, rather than SPEC CPU2000, as evidence of Wildfire's value as a Web infrastructure component. It may turn out that Wildfire's TPC-C or SPECweb99 power blows the doors off everyone else's server, but how the heck are we going to find that out? Compaq should have had these figures two months ago.

Compaq is anticipating $1 Billion in sales in 2000 for the product (including storage and services).

Given the current pricing structure (priced from $100K to >$1 Million), we estimate this means a sales volume of around 1500 systems for the year. This is attainable, although probably a little optimistic: although IBM sold 720 of its RS/6000 S80 systems in the fourth quarter, Sun sold 255 of its E10000 "Starfire" (Ref. TEC News Analysis IBM's Unix Servers Eclipse Sun). This means Wildfire needs to sell about twice as fast as the Starfire - not impossible, but not the kind of odds we'd take, even with the former-DEC installed base (although we hope they succeed).

If the GS 80/160/320 do not meet their sales numbers, we expect a one or more VPs to lose their jobs. It's not always fatal to be late to market (although it is very painful); it's not always fatal to blow the sales projections; but in this case, we believe it will fatal to do both.

User Recommendations

These systems are not for Mom-and-Pop shops or small ISPs. With a base sticker price of $100K, these systems are for larger companies, especially those who expect to expand (the idea being one can expand from eight to 32 CPUs relatively easily). Alpha CPU history indicates that the machine will perform well, although the per-transaction cost (i.e., in a transaction processing situation, or a large database scenario) will likely be high. For example, when running the TPC-H benchmark test (for "decision support environments where users don't know which queries will be executed against a database system" [Source: TPCC]), the IBM RS/6000 exhibited a greater than 3:1 price/performance advantage over the previous large AlphaServer. The AlphaServer had been tested six months prior to the RS/6000, so it is likely that the Alpha's price/performance figure improved, but three-to-one is a lot of gap to cover.

For those companies with enough money to handle the expense, history indicates that the Alpha-based systems produced by the DEC arm of Compaq will be reliable and robust. Customers often use them for 24x7 operation. Although we expect this trend to continue, potential customers should also exercise the normal amount of caution that would accompany the purchase of any "first edition". Customers should also ensure that their desired application has a "Tru64 Unix" version (Compaq's variation of Unix).