In a PDF titled Xserve Transition Guide, Apple says that it will not develop a future version of Xserve. As of February 1, Apple advises users looking for Apple-powered server solutions to run either a Mac Pro or Mac Mini with Mac OS X Snow Leopard Server.
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In that document, Apple says that all Xserve warranties and extended support programs will be honored even after the Xserve is discontinued. (Xserve warranties end three years after date of the server purchase.) Service parts for the Xserve will be available for seven years for California customers, and five years for everyone else.
The company says that the latest Mac Pro -- with its 12-core Intel Xeon processing and 512GB solid-state drive -- surpasses the Xserve in processor performance. Apple also suggests that Mac Mini server setups are very power efficient, with each Mini consuming just 11 watts when idle.