Turned out this amazing new technology was really just an enhanced VLIW, a technology that had failed due to the complexity of the compilers which at the time (1980's) were way too processor intensive to be of any use. However two companies had specialized in the field and HP had since acquired their expertise.
One group of people did get VLIW to work though - the Russians. It transpired that engineers from both Sun and HP had visited a Russian company called Elbrus which had been ahead of the wests technology for years. When they returned both companies promptly started VLIW projects, Sun canned their project and the leaders went off to start a company called Transmeta. HP later merged theirs with Intel.
The Russians kept on working and later announced a very high speed but apparently invisible CPU called the Elbrus 2K.
There was loads of hype around the super secret Merced project and many expected it to just roll over the server market. Such was the expectation in fact that both HP and SGI scrapped their own CPUs (PA-RISC and MIPS Rx000) in favor of Merced.
DEC in fact were so worried they tried to foul things up for Intel by taking them to court, this ended up with with a deal with Intel buying a Fab (chip factory) and DECs StrongARM team. Intel also took over making the Alphas for DEC.
It was only later that rumors started to appear that the Merced project wasn't going quite to plan. Performance was not as expected resulting in HP and SGI promptly backtracking and "extending" their CPU lines.
It was questionable at one point if Merced would ever be released as a CPU at all and in the end it was quietly downgraded to a "development" platform and released under the Itanium brand which The Register re christened as Itanic. The real attack on the market would only come with the 2nd generation McKinley CPU.
While the idea behind Merced was very good, Intel's implementation was very bad. Intel screwed up badly during development and instead of a low cost ultra fast CPU, ended up with a massively complex and hideously expensive beast of a CPU which didn't give the expected stellar performance. This after spending $1 - $2 billion and delivering it 3 years late.
The Itanium family may in fact never reach the lofty performance which was originally advertised, It relies on getting high numbers of Instructions per cycle and this has proved to be a remarkably difficult thing to achieve in practice. In the PowerPC world Motorola actually dropped to 2 Integer units due to the fact the 3rd unit was used so little in previous designs.
The 2nd generation McKinley will increase performance significantly but it in part relies on a massive cache and high bandwidth for it's performance. Notably the Mc Kinley was started at HP, not Intel. It has however the IBM Power 4 to contend with and the Alpha 21364 on it's way which will also have a large cache, this is expected to take the performance lead when it appears.
Ironically the Itanium line may also have the same problems as the x86 it was meant to replace, the ISA is not what it could be, Tech collumnist Paul deMones comment was "The IA64 instruction set architecture was designed by a committee" . In addition to this an article on the Elbrus site compares their approach with that of Intel and Transmeta, they are not exactly impressed with the Intel approach stating that changing the CPU hardware design will reduce efficiency considerably - a known problem in the VLIW world.
Is Mc Kinley going to work or will Intel be a bit player in the world of mid and high end servers? How well the CPU performs is only one factor in that equation - Sun, who leads the server market never seems to have leading edge CPUs. The Alpha was / is the performance leader and yet is destined to die out in the next few years while the engineers are now working for Intel.
But just in case, Intel are said to be working on an x86-64 compatible CPU.
 Summary and Conclusion of "Making a Mountain Out of a Molehill" by Paul deMone in the Silicon Insider column.
About the Author:
Nicholas Blachford is a Software Engineer / Architect from Northern Ireland but lives in Amsterdam, Holland. He is interested in Computer, Micorprocessors and all sorts of things generally techie. He's written open source Audio software on the Amiga and BeOS, and is currently trying to write a geek comedy. There's even a home page here. Apart from that he really needs to get out more. Nicholas can be reached via email on firstname.lastname@example.org.