Updated from 12:01 a.m. EDT IBM ( IBM) is taking dead aim at Hewlett-Packard ( HPQ) and Sun Microsystems ( SUNW) with a new chip and a new line of servers designed to reduce the cost of business computing, Big Blue said Tuesday. Built around IBM's new Power5 microprocessors, the new eServer p5 line will compete in the $21 billion Unix server market. In the first quarter of the year, H-P led the market with a 31.1% share of revenue, followed by Sun at 28% and IBM at 25.2%, according to market researcher IDC. Big Blue's new servers have the ability to run multiple operating systems on the same chip, a feature that allows greater utilization of computing resources. Mainframe computers already have that ability, but this marks the first time so-called micropartitioning has been moved to servers, a far less expensive computing platform. IBM claims that the new servers outperform rival products while using fewer processors in each system. For now, the new chip-and-server combination puts IBM ahead of H-P servers built around Intel's Itanium chip, said Nathan Brookwood, principal analyst of Insight 64, a California-based, boutique market research firm. "What IBM is saying with the Power5
is we can handle workloads with fewer processors than Itanium can ," he said. Brookwood noted that more powerful versions of the 64-bit Itanium will debut in about 90 days. "These companies have been leapfrogging each other," he said. However, IDC analyst John Humphreys said that because servers have gotten so much cheaper, high rates of utilization are considerably less important to information technology professionals. Even so, he said, there are applications that would benefit from virtualization -- and even though that market is only a small percentage of the overall server market, it's still a significant money-making opportunity. Big Blue shares were recently up 95 cents, or 1.1%, to $85.90; Morgan Stanley upgraded IBM Tuesday, citing a "strong fundamental story and an attractive valuation."