Update: Sun server deal with Intel likely

Sun Microsystems may start buying server chips from Intel in a deal that could be announced Monday, according to media reports.

A deal would mark an expansion of Sun's strategy to support the x86 chip architecture for both its Solaris operating system and server hardware. In 2003, Sun put Advanced Micro Devices' (AMD) Opteron chips in a wide-range of low-end servers that are sold with a choice of operating system: Linux, Sun's Solaris, or Microsoft's Windows.

[See also our Tech Watch blog coverage:  Sunny day for Solaris in Intel pact? and  Sparc lives on.]

Representatives of Sun and Intel contacted in London Monday morning could not comment on the reports.

An Intel spokesman in the U.S., William Giles, said, "I don't have any information that I can share with you on this topic. However, I encourage you to attend the press conference."

The companies have scheduled a joint announcement at 10 a.m. Pacific time Monday at San Francisco's St. Regis Hotel, featuring chief executive officers Paul Otellini of Intel and Jonathan Schwartz of Sun.

Sun has used Intel chips in the past, but abandoned them in favor of more efficient processors from AMD and more control over the design of its own brand of processors, the Sparc and UltraSparc.

Buying chips from Intel would offer several advantages for Sun, said analyst Nathaniel Martinez, a program manager who covers the European server market for IDC.

Datacenters are increasingly replacing Unix machines using RISC (reduced instruction set computing) processors with cheaper x86-based servers, Martinez said. Using both Intel and AMD chips will allow Sun to fine-tune its hardware offerings in addition to pushing its Solaris OS to a wider market, he said.

"They already have feedback from the market that x86 for Solaris is working fine," Martinez said.

It would also be a good move for Sun since Intel has increasingly closed the competitive gap with the smaller and nimbler AMD, whose chips attracted vendors for their power-saving features and multicore technology, Martinez said.

As a customer of both AMD and Intel, Sun could also gain leverage. "It's a good way to protect their margins," he said.

AMD declined to make a statement about the move. "Until we actually see an announcement from Sun, we can't comment on rumor and speculation," said spokesman Phil Hughes.

Sun's embrace of x86 technology also put it in an interesting position with Hewlett-Packard and IBM: Most of Sun's Solaris installed base runs the OS on x86 machines sold by those vendors.

A deal with Intel would allow Sun to sell those Intel-based servers directly, and perhaps also capture the service contracts that underpin Sun's strategy of giving the Solaris OS away for free.

"Now if they start supporting Intel as well, they'll be able to regain some of those customers 100 percent," Martinez said.

Last week, Sun cut the price of support plans for Solaris in a move to make it more competitive to Linux offerings from Red Hat Inc.

(Ben Ames in Boston contributed to this report.)