That means it has 4 CPUs (If I have it correct, it has two chips with each of them 2 cores).
You can run that server as one LPAR running all four CPUs
or (with an HMC) partitioned into 4 LPARs each running 1 CPU or (with an HMC and the APV feature) up to 40 SPLPARS each running .1 CPU.
That last number is a configuration maximum, you'll be limited by other factors (CPU need per LPAR e.g. one or two VIO servers will be using more than .1 CPU - typically .5 CPU - and also the amount of memory you have to share among the SPLPARs)
I need to purchase a p5 550 soon. I would like to have 4 LPARS,. Does it means I have to have 5 LPARS in total,1 LPAR is for the VIO. But if I use an HMC, can I do without the VIO?
VIO is a logical partition on the Pseries.HMC is a intel inside pc. So if you want four Lpar can access extend storage disk array through HBA and you just paid less than four HBAs,you must use VIO. VIO is a virtul network and storage server for other logical patition.
Notice ,VIO is a APV component and you must pay it alone
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