I would like to put some numbers against the NC potential. First, assume that a number of 70-80M PC's and other desktop units (Power PC, Unix workstations, ...) will be sold this year. Now suppose 25% of them are potentially replaced by NC's.
First, rational for assuming 25% is extremely optomistic:
1. many computers will be sold into homes or other stand-alone usage. Assume this is 30% now and climbing. These are candidates for NC. Even if they do not want to buy something less than a full PC to get to the Web, it will probably be something based on a game console, and not based on Oracle's NC spec.
2. It is questionable that many small businesses will want to set everything the way Oracle envisions. They are quite happy with what they get with Novell or similar small network.
3. This leaves larger installations that tend to have MIS groups. Even if 50% of this market converts, that still means that there are only about 20M per year NC's, especially in terms of data entry or simple e-mail and application specific situations, or in other specific situations.
Given this analysis, and an estimated royalty to Oracle of $25 per machine, this would be $500M, and this is probably several years away from reaching this level. Also assume that they have a much higher margin (40% operating margin, or 2.5 times Oracle's normal operating margin). If you apply the normal tax rate, this represents about $120M profit per year. During the next fiscal year, Oracle may do $600M without significant NC revenue. In other words, NC may give a maximum 20% increase in growth, but this would be spread over several year, and probably be less than 5% growth per year (compare this to the near 40% growth they have in engine licenses, on a much larger base).
Now if the above analysis is true, why is Oracle spending so much effort on this proposal. The reason is that it has the potential to break the Wintel monopoly. If that is broken in big business, this has the potential to make 10% market share difference over the next 10 years relative to Microsoft. This is where the huge profits are. Oracle must do what they can to slow the move to Microsoft as a single source supplier of solutions (OS, engine, applications development, internet solution). If Oracle can put together such an equivalent based on Unix, Java, NC, its engine, and its application development tools, it can offer this as an alternate to Microsoft. Just changing growth curves in the OS market by a few percentage points can make huge differences over 10 years. That is what Oracle is trying to do with NC. They are very scared of the alternative, where Microsoft owns the OS and the web connection (after breaking Netscape); such a course would leave Oracle always reacting to Microsoft, rather than in the current controlling position they now have (at least in many minds). |
