Sun and Intel kiss and make up

It’s a genuine lovefest! Sun Microsystems and Intel, two companies that have rarely found themselves on the same side of the aisle, puckered up and announced a deal yesterday for Sun to use Intel chips in some of its computer servers, a setback for the rival chip maker Advanced Micro Devices.

The deal is of particular significance for Sun, which has been struggling to recover since becoming a prominent casualty of the dot-com bust that started in 2000.

Under the deal, Sun will use Intel’s Xeon chip in some servers starting late in the first half of this year. Sun will continue to sell machines using Advanced Micro’s Opteron server chip, as well as those using its own Sparc processor.

By doing so, Sun will be able to offer servers based on a range of chips, following a strategy adopted by Dell, I.B.M. and Hewlett-Packard, three rivals to which Sun has lost considerable market share in the last several years.

The deal comes at an opportune time for Intel as well. “We’re coming together at a time when both companies have great momentum,” the chief of Intel, Paul S. Otellini, said. “And I’ve always believed that momentum breeds momentum.”

After several quarters of hurting, losing market share to Advanced Micro, Intel has been gaining steam, the result of a restructuring and the success of Intel’s new line of processors.

As part of the agreement, Intel is providing an endorsement of Sun’s Solaris operating system, including dedicating development resources to ensure the software runs well on Intel chips.

Last year, Sun made Solaris, long a highly proprietary system, into an open-source program that is available for free, making it a more viable competitor to Microsoft Windows and Linux. Since then, there have been more than seven million downloads of the Sun program, Mr. Schwartz said.

Mr. Schwartz and Mr. Otellini stressed that the deal, which joins two companies that invest heavily in research and development, was a significant technical collaboration, not simply a sales agreement.

It remains unclear just what direct impact the Sun-Intel deal will have on Advanced Micro, though it clearly comes at a bad time for the company, which is set to announce quarterly earnings on Tuesday.

Analysts, however, agreed that the Sun-Intel deal will probably hurt Advanced Micro much more than it will help Intel.

http://www.nytimes.com/2007/01/23/technology/23intel.htm