CSFB hilis Win2K's scalability,reliability,P/F, rates ST BUY
Investment Summary
Microsoft officially launched Windows 2000 (W2K) yesterday, the largest and
most important product launch since Windows 3.0. The product comes in three
versions, Windows 2000 Professional, Windows 2000 Server, and Windows 2000
Advanced Server. Concurrent with the launch, Microsoft revved up what we
believe will be the biggest product marketing campaign in Microsoft's history,
totaling close to $500MM over the next two years. Since Microsoft now
believes that the product will fair well in direct comparisons with Unix
vendors on enterprise-level servers, we expect the campaign to focus on three
themes that are critical to this market: reliability, scalability and price/
performance. Metrics that gave credence to Microsoft's claims were
highlighted by Microsoft itself, its customers, its partners, and independent
third parties. We've summarized some of these in the next three paragraphs.
Reliability - according to ZD Labs, Win95 and NT 4, on average, required re-
booting after 2.1 days and 5.2 days, respectively. ZD has been running W2K
on a specified set of programs for over 90 days and had not yet experienced
any problem requiring rebooting. Two enterprise customers, Texaco and Schwab,
deployed W2K early and stated that they've experienced an 18-fold improvement
in reliability.
Scalability - Dell.com, the largest Internet shopping site, is running
completely on W2K. It handles 2.5MM visits per week and roughly $14MM of
sales are conducted through it daily. Microsoft and Dell are completely on
W2K internally. On the SAP- SD benchmark trials, an industry standard trial
of scalability, W2K/ SQL Server 2000 supported 48% more concurrent users than
NT4/ SQL 7.0 -- 6,700 versus 4,500. Additionally, a senior executive with SAP
claimed that W2K/SQL Server 2000 meets the requirements of every R3 customer
worldwide.Price/ performance - Microsoft, which has long focused on the price/
performance of its software on industry standard hardware, highlighted for
the first time that it had the best overall performance on industry standard
benchmarks released yesterday. A Compaq Proliant 8500 server configuration
with 96 processors running W2K/SQL Server 2000, achieved 227,079 tpmC, ahead
of a Sun Enterprise 6500 Cluster Solaris 2.6 /Oracle 8i configuration at 135,
461 tpmC. The 67% better performance was magnified on a price basis, since
price/tmpC came out at $19.12 for Compaq and $97.10 for Sun. Even before W2K
Server was released, its predecessor, NT4 Servers occupied every one of the
top 40 tpmC price/performance positions.
Unisys claimed that the cost of a W2K environment will be about 1/3 that of a
Unix environment. Microsoft also highlighted that costs will become
increasingly important in the dot.com world as companies in that space are
required to start showing bottom line performance.
We believe all three of the themes will be intertwined into Microsoft's
approach to this space - scaling out with many smaller servers as opposed to
scaling up by adding more processors to one box. We expect them to use
incidents like last December's eBay crash as an example of why its better to
have redundancy (instead of single points of failure) built into the system
to maintain the reliability and performance of the system.
Microsoft also highlighted momentum W2K has already achieved. Since W2K had
been delayed so long, it shouldn't be too surprising to see that there would
be pent-up demand. IBM indicated it would roll it out to 300K desktops
worldwide over the next year. GM indicated it would roll-out to 125K desktops
over the next 18 months. Boeing indicated it would roll-out to 180K desktops.
10,000 dot.com web sites are currently running W2K including Nasdaq, MSNBC
and CBS MarketWatch.com
In addition to the three members of the W2K family of products released
yesterday, several others will be forthcoming over the next 10 months. Each
represents an additional revenue opportunity for Microsoft. The offerings
announced include: Windows 2000 Datacenter, Windows 2000 64 bit, SQL Server
2000, Exchange 2000, Embedded Windows 2000, Application Center 2000, Commerce
Server 2000, BizTalk Server 2000, and Host Integration Server.
Windows 2000 products appear likely to increase momentum for corporate
desktops and WinTel servers. Microsoft, Dell, Intel and Compaq appear the
most apparent winners. For HP and IBM it would also be a positive. While its
appropriate for Microsoft stock to be somewhat discounted due to the DOJ
issues, we believe it should also reflect part of the upside associated with
Windows 2000. We reiterate our Strong Buy. |
