Tech giant Hewlett-Packard ( HPQ) overhauled its server lineup Monday, unveiling a slew of new machines containing Intel's ( INTC) next-generation Nehalem chip.

The Intel Xeon 5500, announced Monday afternoon, is the server version of Intel's Nehalem processor, and forms the basis of H-P's latest assault on an increasingly tough market.

The 11 Nehalem-based products include blade servers, rack servers and tower servers, eight of which are completely new designs. H-P describes the launch as one of the biggest announcements to come out of its ProLiant server business, and is clearly gearing up for some intense competition.

The Palo Alto, Calif.-based firm gained a new rival recently with Cisco's entry into the blade server market, and it may also face a joint IBM ( IBM)/ Sun Microsystems ( JAVA) onslaught at some point in the near future.

H-P has so far avoided commenting on the possibility of IBM acquiring Sun but has been much more vocal about the threat posed by its long-time networking partner Cisco Systems ( CSCO).

At a time when users are struggling to justify their technology budgets, H-P is now looking to register on firms' radars thanks to the Nehalem silicon, which already features in desktops from Apple ( AAPL).

By using Intel's Xeon 5500 processors and its own Smart Array Controllers, H-P claims to offer twice the memory and storage of its previous generation ProLiant G5 servers. The company is also giving a song and dance about the G6 servers' power management capabilities, something that could resonate in power-hungry data centers.

"These are half the power footprint of the previous generation from us," said Paul Gottsegen, vice president of H-P's Industry Standard Servers business. The executive told TheStreet.com that the machines use specially built sensors to monitor and adjust components such as fans, memory and processing to keep the systems cool. "Now we have this 3D image where you can see which part of the system is hot and which is cool," he said.

H-P has also added a feature called Dynamic Power Capping from some of its other ProLiant offerings, which can reallocate power around a data center by limiting the amount of power drawn by a server.

Despite all the Nehalem brouhaha, Intel is not the sole focus of H-P's attention, and the company says that rival AMD's ( AMD) next-generation chip , code-named Istanbul, is also part of its long-term server strategy.

"The next wave of updates are the Istanbul updates that we will see," said John Gromola, director of H-P's industry standard servers business. "That's just around the corner."

H-P is not the only server vendor jumping on the Nehalem bandwagon. DELL ( DELL), for example, unveiled 14 blades, servers and workstations based on the new processor last week, and IBM will also offer the silicon within its own systems.

The Nehalem launch did little for H-P's stock Monday. The firm's shares slipped $1.21, or 3.63%, mirroring the broader retreat in tech stocks that saw the Nasdaq dip 2.81%.