Chipmaker Intel will release a cut-price Itanium 2 processor in a bid to boost sales

Intel hopes to ignite server chip sales with Deerfield, an energy-efficient Itanium 2 processor priced to move.

Deerfield, which is aimed at blade server and workstation markets, will debut in the third quarter at $744 (£456.50), according to Intel product plans examined by CNET News.com. That's substantially below the price of Intel's other Itanium 2 chips, which range in price from $1,338 to $4,226.

The price is only $107 above the company's fastest desktop and notebook chips, which sell for $637 and are manufactured in much larger volumes, making them cheaper to produce.

The pricing seems deliberately calculated to attack one of the chronic problems associated with the Itanium line: slow sales. Since it came out in May 2001, the Itanium family has barely made a dent in the server market in terms of unit shipments. The California-based chipmaker, however, has steadily increased performance and funded application development, which could begin to change the picture.

"Performance is not a reason not to adopt (Itanium) any longer, and price is not a reason not to adopt any longer," Illuminata analyst Gordon Haff said.

Although the servers are generally less sensitive to pricing pressures than PCs, cost is a factor in the kind of markets Deerfield will address. Blade servers can contain hundreds of processors, which can drive up costs. Workstations also have to compete against high-end desktops.

Currently, Intel serves the blade and workstation market with its Xeon DP line of processors, which range in price from $156 to $851. Intel also makes a line of Xeon MP processors for servers needing four or more chips, which start at $1,117.

While Xeons and Itaniums can go in similar types of computers, they are very different. Itaniums are 64-bit chips, which mean they can handle far more memory, but they need specialised software. Xeon chips can't juggle as much memory, which increases performance, but run regular Windows and Linux code, a big selling point.

Last month, Mike Fister, general manager of Intel's Enterprise Platform Group, said that the company would try to expand the breadth of the Itanium line, starting with Deerfield. Though the final price might vary slightly, Deerfield is likely to cost far less than other members of its clan.

And, while the chip won't exhibit the same performance as top-end Itanium 2 chips, Deerfield won't be a slouch, according to Fister. The chip will perform at the same level, generally, as McKinley, the first version of the Itanium 2, which was rated well by analysts.

Deerfield will run at 1GHz and contain a 1.5MB cache. Although 1GHz is slow for a desktop, in terms of performance, the 64-bit ability and other architectural enhancements put Itanium chips ahead of Pentiums.

The chip will also consume less power, and therefore exude less heat, than McKinley; an important factor for dense blade servers. A McKinley running at 1GHz with a 1.5MB cache, however, will cost $2,247.

"Basically, Deerfield is being positioned very much against Xeon," added Haff. Still, a lack of applications or a dislike of Itanium "for philosophical reasons," could keep a lid on sales, he speculated.

Intel also plans to come out with an Itanium 2 tweaked for clusters, chains of one- and two-processor servers that linked together can act like supercomputers. The Itanium 2 for clusters will run at 1.4GHz, contain a 1.5MB cache and cost $1,172.

Meanwhile, the Xeon line marches on. The company plans to release a 3GHz Xeon for workstations and two-way servers containing a 1MB cache. Currently, these Xeons contain caches of 512KB. A similar chip running at 3.2GHz will appear in the fourth quarter. In the first half of next year, Intel will refresh the Xeon DP and MP lines of chips.

News.com's Stephen Shankland contributed to this story.