H-P Hands Over Itanium to Intel

Citing lackluster sales, the companies end their 10-year pact to codevelop the chip for servers.
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Intel's

(INTC) - Get Report

plans for high-end computing reached a sad milestone Tuesday, with

Hewlett-Packard

(HPQ) - Get Report

saying it would end the partnership that developed the less-than-successful Itanium chip.

The chip, a joint project of the two companies, was supposed to give them an advantage in the market for powerful server computers. But the chip's real benefit is only apparent when running software that has been "recompiled," or rewritten, for the new platform. Few companies bothered to take on the expense, and Itanium's failure to gain traction has been one of Intel's many recent setbacks.

H-P will transfer its Itanium development team in Colorado to Intel, Robert Manetta, an Intel spokesman, told

Reuters

. H-P will continue to use Itanium chips in its servers and will pledge $3 billion in developing Itanium as a competitor in the $20 billion high-end server market, he said.

The project began about a decade ago, long before H-P acquired

Compaq Computer

, and before Intel CEO Craig Barrett assumed control of the company. A new version of the Itantium2 is due in late 2005. With two cores and 1.7 billion transistors, it is expected to add significant muscle to the chip's performance.

The news, which was expected, didn't do much to the share price of either company. H-P shares closed the day at $20.71, a gain of 11 cents; Intel was off 10 cents to $23.14 a share.