The highlight of the recent results from Intel was the news that the Itanium schedule has slipped. Intel said it won't start receiving revenue from the chip until the fourth quarter of this year, a quarter later than predicted, due to the need for another revision to the chip. The only computers shipping with the Itanium chip this year will be 'pilot systems'. The general unavailability will encroach on Itanium's successor, codenamed McKinley and due to arrive in the second half of 2001.
Investors in resellers such as Computacenter, Compel, Morse and Acuma (owned by Skillsgroup) beware: we have already had one set of profit warnings; the latest news could push in a second, and shares in the resellers have begun to drift.
Itanium to tackle ebusiness
The Itanium processor is the first in a family of IA-64 processors from Intel and is the company's most significant development since the 386 processor was introduced in 1985. Itanium will complement PIII and Xeon processors, and extends Intel's reach into the highest levels of computing to enable powerful servers and high-performance workstations to address the demands of ebusiness.
The Itanium chip and its successors are geared to muscle into the market for servers based on high-priced chip designs from Sun Microsystems, IBM, Hewlett Packard, Compaq and SGI. Microsoft has already geared up to catch 64bit upgrades. On 12 July, it previewed a release of the 64bit Windows operating system (OS) for the Itanium processor, which gives developers a version of the OS to use in the final stages of next-generation 64bit hardware and software production.
For now, though, UK IT departments are waiting to upgrade to Windows 2000 because of fears that early versions could contain errors. Research from the National Computing Centre shows that 66 per cent of IT users have plans to move to the new OS, but almost half plan to wait, and most of the rest will upgrade only gradually.
Computacenter at risk
The company at greatest risk from the slow upgrades is Computacenter, because it is the biggest. On 13 June it issued a warning that its profit before tax for the period from July 1999 to June 2000 is expected to be £55m. Also, the widespread deployment of Windows 2000 is not expected to gain momentum until the latter part of 2000, which will adversely affect IT rollouts.
Users short of capacity or performance are likely to rely on 'bandage' solutions and piecemeal upgrades, which will dent Computacenter's business further.
If the Wintel market remains slow, there will be problems for the other resellers, as Computacenter beefs up its Unix presence and looks for low-value contracts to capture any growth there may be.
Although Compel, Morse and Acuma stocks all look cheap, I believe they are 'old tech'. Market conditions combined with strong price erosion mean that there are risks of a second round of downgrades.
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