WSJ.com - IBM Takes New Tack in Server War

WSJ.com - IBM Takes New Tack in Server War: "... Unable to compete on price with low-cost leader Dell Inc., IBM is trying to buck the trend and make a commodity device better, hoping that users will pay more for added oomph.
IBM is expected today to unveil a new 'chipset' -- industry lingo for the collection of auxiliary circuitry that surrounds a processor -- that it says increases the performance and capabilities of a plain-vanilla, low-end server. ...
The chipset, dubbed x3, will run in conjunction with central processing chips from Intel inside some of IBM's low-end servers. A typical four-processor configuration will cost around $12,500, IBM says.
Big Blue has been making performance enhancements to Intel servers for years, but executives say this iteration is the most advanced yet, drawing on features from IBM's flagship mainframes as well as from its higher-end servers running the Unix operating system.
X3 designers included 'literally the same people who worked on' the mainframe, says Susan Whitney, who runs IBM's low-end server unit. The chipset includes speed boosts such as an extra layer of 'cache' -- a chunk of high-speed memory -- positioned close to the processor to reduce the amount of time the chip waits for needed data.
...
That value-added strategy seems to have worked better for IBM, though, in the low-end server market, which industrywide had nearly $19 billion in sales in 2003, according to market researcher IDC. After languishing in the late 1990s as Dell zoomed past, IBM has picked up some ground in recent years. Its share of Intel server market revenue was 19% compared with Dell's 22.2% for the first nine months of 2004, according to IDC data, narrowing a gap that was as large as five percentage points in 2001. Hewlett-Packard Co. is No. 1, with a 32.9% share for the first nine months of 2004."