I guess SUNW share holders like to read this (from The Street.com)
Silicon Valley: Time Isn't on
Microsoft's Side
By Medora Lee
Staff Reporter
10/1/98 4:22 PM ET
SAN FRANCISCO -- Microsoft
(MSFT:Nasdaq) may have played
vaporware for the last time.
Delays from the Redmond, Washington, software giant are
something companies have gotten used to and have put up
with many times in the past, but things now may be
changing.
When Microsoft delayed its second test version of Windows
NT 5.0 in July, some industry watchers warned of
consequences. David Readerman, Microsoft analyst with
NationsBanc Montgomery Securities, wrote in his report:
"We expect this NT 5.0 slippage will negatively impact large
enterprise, higher performance NT-application sales ... in
favor of UNIX alternatives." Readerman kept a buy rating on
Microsoft then but lowered his fiscal year 1999 earnings
estimates of NT sales from $3.6 billion to $2.9 billion.
Nationsbanc Montgomery Securities has no underwriting
relationship with Microsoft.
Most industry watchers are betting that the final NT 5.0
version will not be delivered until late 1999 or even sometime
in the year 2000.
The arrival of NT 5.0 is key to Microsoft's future growth
because it is the company's chance to attract larger
corporate clients, who generally have relied on mainframe
computers or UNIX-based operating systems. Windows NT
5.0 is promised to be more powerful and scalable (capable of
being changed in size and configuration) than the current
version, Windows NT 4.0. Furthermore, NT 5.0 is also said
to offer a whole bag of goodies such as Internet capabilities
and an active directory, allowing computer users and other
software programs to find other users, databases and
resources in large computer networks.
But as Microsoft delays NT 5.0 to "fine-tune" some 40
million lines of code, others are stepping up to meet
customer needs. Take Novell (NOVL:Nasdaq), which had a
near-death experience after losing market share to
Microsoft. Novell, which specializes in software that powers
networks of desktop and central-server computers, is
already exploiting the window of opportunity left open by
Microsoft. It shipped ahead of schedule NetWare 5, an
upgrade of its flagship operating system that focuses on the
Internet and provides a scalable directory. Novell says the
market is interpreting the Windows NT 5.0 delay as a signal
to renew its commitment to Novell.
Any delay is bound to be good for Sun Microsystems
(SUNW:Nasdaq), the market leader in UNIX-based operating
systems. Sun used to own the midrange and high-end server
and workstation market. But the combination of cheap
workstations based on Intel (INTC:Nasdaq) chips and
Windows NT software has dented Sun's domain.
"Sun continues to gain ground in the UNIX market, while the
Wintel [Windows/Intel] threat drifts further into the future,"
says Kurt King, an analyst at Nationsbanc Montgomery
Securities who rates Sun a buy. Nationsbanc Montgomery
Securities has no underwriting relationship with Sun.
John Oltsik, an analyst with Forrester Research, goes
further, saying "We're recommending that people not put NT
5.0 into production until 2001, in terms of infrastructure. With
about 20 million new lines of code, we think Microsoft will
have a lot of patchwork to do. The move from NT 4.0 to 5.0
will be a difficult transition."
Nationsbanc's King agrees. "We continue to find little
interest in migrating enterprise UNIX applications to the
Wintel platform within the next two or three years,
particularly given the need to deal with Y2K issues in the
interim."
In the meantime UNIX continues to outperform NT. A
Morgan Stanley Dean Witter study shows that UNIX
servers are actually outperforming Wintel servers. Morgan
Stanley analyst Thomas Kraemer says, "UNIX servers are
actually pulling away." Morgan Stanley Dean Witter has no
banking relationship with Sun but has participated in public
offerings for Microsoft.
As businesses move toward the Web, they are looking to
UNIX servers for their reliability. For example, clothing
retailer J. Crew replaced 30 NT servers with 5 Sun Solaris
systems in July to power its e-commerce Web site.
"If your Web server can only handle 1,000 hits and your site
got 1,500, you just lost 500 customers," Kraemer says.
Jonathan Perera, Microsoft lead product manager for
Windows NT servers, puts on a brave front. He argues that
NT scalability is comparable to UNIX but that NT provides a
higher level of performance for the price. When NT 5.0 is
released next year, Perera says Microsoft will be able to
capitalize on its huge NT 4.0-installed base.
Hambrecht & Quist analyst Chris Galvin believes Windows
NT will remain the favorite over the coming years and
continue to chip away at all other platforms. Hambrecht &
Quist has no banking relationship with Microsoft.
"We are still early in seeing the success of Windows NT,"
he says. "The trend of Microsoft gaining ground and
increasing its market share with a more expensive operating
environment seems to be what should be expected over the
next few years."
Should you bet against Microsoft? "You have to remember,
the best technology doesn't always win, and Microsoft is
big." says one fund manager who owns small positions in
both Microsoft and Sun.
But this could be one delay too many. Morgan Stanley's
Kraemer bets that "when Wintel finally does deliver
scalability, we think the odds are good that many partygoers
will have moved [to UNIX]."
|
