1. In summer 1998, what is the position of the Enterprise Server Group (ESG) in its industry? How has it evolved? Why?

ESG
Enterprise Server Group (ESG) was formed in 1997, when HP refocused its efforts on enterprise computing. Historically, in the server segment, HP had been the number one UNIX server vendor by revenue since 1993 with its HP-UX product line. But due to HP’s focus on developing IA-64 with Intel, Sun Microsystems (Sun) capitalized on the doubt regarding HP’s commitment to UNIX-based machines. By summer 1998, Sun had shipped more UNIX servers than any other vendor, including HP and IBM. Also HP as well as IBM had not joined Sun’s Solaris camp. It was clear that HP, and in turn ESG, no longer held a dominant position in the UNIX market.

Need for Evolution to Maintain and Increase Market Share
WINTEL systems were emerging in the field of enterprise computing. The growth rate of UNIX based machines was expected to slow to a CAGR of 5% from 1997 to 2001, as WINTEL systems were expected to become more powerful and reliable. Additionally, many industry experts believed that RISC was approaching its limit of technology on its S-curve of technology performance (Figure 1). Additionally, as WINTEL captured increasing volumes at low end of the workstation/server market, the brunt of competitive disadvantage on RISC-Unix computers was felt since manufacturing of RISC chips in lesser volumes and the need to port software to each UNIX version proved more costly. It was clear that evolution was the need of the hour.

Merced and IA-64
The answer to the need of evolution came in the form of a chip code named Merced and its associated architecture IA-64, both of which were joint developed by HP and Tntel. Intel expected that Merced would constitute a bridge between the historically separate worlds of RISC and CISC.

ESG at Crossroads
In summer 1998,