Sun Microsystems' New Blade Server: Implications for Hardware and Chip Stocks

Excerpt from our One Page Annotated Wall Street Journal Summary (which you can get emailed to you every morning by signing up here):

Sun Pursues Bigger Role In Blade-Server Market

• Summary: Sun Microsystems is today announcing a new blade server system designed by a team led by Sun co-founder Andy Bechtolsheim and based on AMD chips. The Sun Blade 8000 has four processor sockets per blade. IBM and H-P offer four-socket blades to customers on request, and believe the sweet spot in the market is for two socket blades. Blade servers account for only 7% of the server market now, according to IDC, but that number is expected to rise to 26% by 2010. Sun previously introduced a blade server in 2003 but withdrew it from the market in 2005 due to inadequate performance.
• Comment on related stocks/ETFs: Incrementally positive for Sun (SUNW) -- any new product with credibility helps. Stronger positive impact on AMD (AMD) and another negative data point for Intel (INTC), as Sun's choice of AMD is further validation of AMD's lead in server chips over Intel, and the design win will lead to multi-year sales. Negative for Rackable Systems (RACK) which sells AMD-based blade servers, and also (though less so) for IBM (IBM) and HP (HPQ) which compete in this market but focus on 2-socket blade systems. No impact on Dell (DELL) because Dell doesn't sell into this market segment.