Hewlett-Packard is introducing a long-awaited upgrade to its Unix operating system and launching new, affordable Integrity servers in a direct challenge to rival products from IBM and Sun Microsystems.

HP Thursday is introducing an Integrity rack server with a starting price below $5,000 and an Integrity blade server below $4,000.

Integrity servers, powered by Intel's Itanium processors, have been traditionally sold as high-end products used for mission-critical business applications. By offering Integrity servers at these prices, HP is aiming at entry-level servers from Sun, HP executives said.

"We believe, with our entry class servers, it's very much targeted at taking that away," said Nick van der Zweep, director of Business Critical Systems at HP. "We think Sun's in a vulnerable position in the entry class right now."

The new HP-UX 11i v3 features enhanced virtualization management capabilities, which should give it an advantage over IBM, said van der Zweep. IBM often touts its legacy in virtualization dating back to its mainframe computers, but van der Zweep said HP has been more adept at bringing virtualization to the server platform.

The Unix operating system is a standards-based OS, but IBM, HP and Sun each add unique features to differentiate their products.

HP has encountered delays in the development of HP-UX v3, which was originally scheduled for release as far back as late 2004. But HP, instead, focused on adding new features as they became available to HP-UX 11i v2 rather than hold them for version 3.

"HP has deliberately not made this a 'must upgrade to today' release," said Gordon Haff, senior analyst at the research firm Illuminata. "The case here is that upgrade when you're ready."

HP-UX 11i v3, shipping now at a list price of $150 per core, does have enhanced features over v2, such as running software applications 20 percent to as 30 percent faster than on version 2, HP claims. Notably, it runs Java applications faster, another dig at Sun, which developed the Java programming language.

"It's not really clear what's new here," said Tom Goguen, vice president of Sun's Unix operating system, Solaris.

Solaris 10 is a free download that can run on 735 different brands of servers, including HP, while HP-UX only runs on HP servers, Goguen said. Solaris 10 already includes a virtualization manager called Containers, and has security features he considers "second to none."

HP, IBM, and Sun are close competitors in the $17 billion Unix server market and, combined, control about 80 percent of it, said Jean Bozman, an analyst at IDC Research.

"Every time there is a major Unix bid out there from the government or some big business, all three of them are in there pitching their products and it gets very intense at times," said Bozman.

However, what makes HP's latest Unix release significant is that HP actually went into the operating system kernel and made changes that are part of the reason they achieved an increase in application performance, she said.

The introduction of the new $4,931 rx2660 rack server, shipping now, and the $3,827 BL860c blade server, shipping in March, should also put to rest questions about the viability of the Itanium processor platform, said Markus Berber, HP's Integrity Blades Strategist.

Itanium has been slow to catch on in the market because relatively few software products were certified to run on it. Today, 10,500 applications can run on Itanium, more than double the amount of just a year ago, said Berber.

"It is self evident that there are many OEMs who are voting with their dollars or yen or Deutsche marks or French francs in support of [Itanium]," he said.