Sam,
HI!!
W2K Week: The Fallout for PC Makers
By Jim Seymour
Special to TheStreet.com
2/16/00 10:16 AM ET
Whatever happens for Microsoft (MSFT:Nasdaq - news) and its shareholders following tomorrow's splashy rollout of Windows 2000, one group is almost certain to benefit, and soon: PC and server makers.
The much-bashed boxmakers have been longing for the zip of a new operating system's arrival. It isn't just that they think they'll see a jump in the number of customers buying new PCs because of the hype about a new OS; it's because they know two little secrets about the Windows 2000 (a.k.a. "W2K") upgrade:
First, their most important corporate customers have been holding off on replacing aging PCs, both desktops and notebooks, for months, even years, because they wanted to buy replacements with Windows 2000 preinstalled at the factory.
Second, it's a damned good thing they did wait. Because as anyone who's worked with W2K knows, you don't want to install Windows 2000 Professional (the "workstation," single-user version) over an older Windows NT/Windows 95/Windows 98 installation, on an existing machine if you can possibly avoid it, but rather, buy a new machine with W2K installed at the factory (more on this tomorrow).
So with W2K now loose in the streets -- Dell (DELL:Nasdaq - news) has been taking orders for PCs preloaded with Windows 2000 for some time now, and may even have delivered a few -- the PC makers expect to see corporate sales of notebooks and desktops heading up sharply.
(In fairness, corporate IT departments don't often upgrade entire operating systems for installed PCs, anyway; they've learned the hard way that no matter how easy and solid the install-over-your-LAN programs included with new operating systems are supposed to be, the costs of upgrading an existing machine almost always make replacing it a better deal.)
As I said yesterday, I think the first corporate move to Windows 2000 will be for notebooks. The advanced power-management circuitry built into new notebooks today works with W2K to deliver longer battery life between charges. Add in the still-longer battery life available from Intel's (INTC:Nasdaq - news) most recent SpeedStep two-speed CPU chips, which throttle down to slightly slower performance in return for stretching battery life, and you have the potential for big leaps in battery performance. (Unfortunately, right now that potential is mainly ... potential. Independent testing has shown that today's gains are small, but with more experience with power-management implementations, and with Windows 2000, I expect to see real improvements later this year.)
I think the big winners here will be Dell and Compaq (CPQ:NYSE - news), with Hewlett-Packard (HWP:NYSE - news), Gateway (GTW:NYSE - news) and IBM (IBM:NYSE - news) gaining, too. (Only those companies with serious corporate PC sales are going to enjoy this run-up from Windows 2000, because whatever W2K may be, it's not a consumer product.)
If there's going to be a big move in corporate sales of desktops and notebooks, using Windows 2000 Professional, what's going to happen with the boxmakers and the two server versions of W2K?
I don't think W2K represents nearly such a big business opportunity for them as does the chance to start replacing those long-in-the-tooth desktops and notebooks -- but only because big companies have been buying new servers right along, not waiting for W2K to come to market.
Dell, for example, already has a roaring server business, as do Compaq, H-P and IBM. (Familiar names?) I think Dell's going to steal market share from all its server competitors this year, but otherwise, I don't see any seismic shifts in this area.
Windows 2000 Server and Windows 2000 Server Professional offer many advantages, often important advantages, for the men and women in corporate America's IT back shops, and they're going to move to it as soon as they feel comfortable with its stability and security. But that's not likely to lead to a big jump in the number of servers sold, just a nice jump for Microsoft in the number of W2K networking licenses sold.
Other Players
Some have speculated that companies have been waiting for a look at W2K before making a decision about jumping to Sun (SUNW:Nasdaq - news) servers and its Solaris operating system, or to Linux on Intel x86 boxes. And a robust, relatively bug-free Windows 2000 would hurt those vendors. I doubt both notions.
If you're going to Sun for its industrial-strength servers, you've already made that decision without worrying much about Windows NT or Windows 2000 Advanced Server. And if you're going to jump to Linux -- a proposition I really doubt, as explained Tuesday -- you don't really give a hoot about Windows, period.
Another group of vendors some believe will be affected by the final release of W2K is the small crowd of Linux publishers/distributors, most notably Red Hat (RHAT:Nasdaq - news). The idea here is that now that buyers can get a truly stable Windows NT follow-on, there will be less interest in moving to any distribution of Linux, especially the ones you have to pay for.
I doubt that, too. I don't think many companies have been driven away from Windows NT to Linux, by questions about reliability, or by price or by Microsoft's tech support for NT. If they went to Red Hat or another Linux reseller, they did so for other reasons. If they stayed in the Windows-networking fold, as virtually all have, they had their reasons.
I think any threat from Windows 2000 has already been priced into the shares of Red Hat and its cohorts.
Mid- to long-term, a solid, stable Windows 2000 is good for the entire computer industry. But short term, it's the boxmakers that are going to make out like bandits with W2K.
-------------------------------------------------------------------------------
Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings can change at any time. Seymour does not write about companies that are current or recent consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites your feedback at jseymour@thestreet.com.
Hey I'm going to bed now with wonderful dreams of where this stock will be very shortly...If ya read this and don't feel DELL is setting the investment world up for a surprise (30%?? Naaaaahhhh!!!) somethings wrong...Jim Seymour just took the guise off Michael's one comment at the CC concerning the downplaying of W2000...DELL will have "an outstanding year"...
Thanks Sam...This one is for the "bible's"...
Best, Kemble |
