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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Ian@SI who wrote (2242)	8/10/2002 3:16:07 AM
From: Jeffrey D	Read Replies (2) \| Respond to of 25522

Interesting article from tomorrow's IBD on thin clients. IBM and MSFT are on board and demand growing while PC demand is falling. Anyone see any problems here for AMAT if this trend continues? Seems to me thin clients use chips too! Jeff << Market For Thin Clients Heats Up As Personal Computer Sales Cool BY PATRICK SEITZ INVESTOR'S BUSINESS DAILY While personal computer sales languish, thin-client computers are showing robust growth. Thin-client devices are cheaper to buy and maintain than PCs — and that's key for these belt-tightening times. Unlike PCs, the stripped-down systems offload data processing, storage and applications to server computers. Thin-client shipments grew 21% last year, while PC shipments fell 4%, says International Data Corp. IDC expects thin-client unit shipments to grow at a nearly 30% compound annual growth rate between 2002 and 2006. Last year, vendors shipped about 1.1 million thin clients worldwide. Thin clients aren't new. But sales didn't start to take off until Microsoft Corp. (MSFT) embraced the devices. After fighting thin clients for years, the software giant now sees them as a way to extend the reach of its Windows computer operating system. "What's driving the growth of this market is that Microsoft has moved from foe to friend and is actually out evangelizing the idea of thin-client computing and running applications on servers," said Michael Kantrowitz, chief executive of Neoware Systems Inc. (NWRE), a thin-client maker "They're interested in going after environments where PCs have not been successful and have not been sold." -------------------------------------------------------------------------------- Image: Thin Clients Grow In Lean Times -------------------------------------------------------------------------------- Microsoft has realized that some workplaces are better suited for thin clients than fat-client PCs. One potential target: the many businesses that rely on old green-screen terminals connected to mainframes or minicomputers. Neoware estimates that large businesses, such as airlines, are still using 30 million to 50 million green-screen terminals. Bob O'Donnell, an analyst at IDC, doubts the market is that large, but agrees there's a "sizable, reasonable opportunity for green-screen replacement." Neoware and other thin-client vendors are looking to replace PCs in many environments. Hotels, retail outlets, branch banks, call centers, schools and libraries are key markets for thin clients. The devices are best for simple chores, such as filling out forms and surfing the Web. Wyse Technology Inc. leads the thin-client market. It made 38.1% of the world's thin clients last year. Neoware, however, is seen as a rising star. In January, it bought IBM Corp.'s (IBM) thin-client business. It's also purchased thin-client businesses from Boundless Corp. (BND) and Network Computing Devices Inc. within the last year. With the IBM and NCD deals, Neoware should rise to No. 2 in worldwide thin-client sales this year. It's already No. 2 in the U.S., with 8.4% market share in 2001 vs. 49.7% for top dog Wyse. The sales pitch for thin clients resonates in today's economic climate because they promise a return on investment. Firms save money upfront on hardware vs. PCs, and maintenance and administration costs are much less, Kantrowitz says. Tech support workers can remotely manage thousands of thin clients from a central location. Thin clients also are more secure than PCs. "The basic reason why people implement thin-client computing is because it saves them money," Kantrowitz said. "It's the least expensive way to roll out new applications or replace obsolete desktops." But thin-client vendors must do a better job educating potential customers, O'Donnell says. Many companies don't think thin-client computers can run the right software applications, he says. Or they worry that thin clients lack performance. Though IBM sold off its thin-client business, it's still keen on the market. As part of an ongoing alliance, IBM's sales force promotes Neoware devices. Big Blue is interested in thin clients because it wants to sell large servers. Microsoft, meanwhile, sees an opportunity to sell more server software and get a share of business it couldn't get before. About 70% of Neoware's sales are from devices running Microsoft software. The rest comes from systems running Linux software. Contractors build Neoware's hardware, letting the company focus on designing software to manage and secure the devices. Neoware is optimistic the market can keep bucking tech trends. "Unlike most technology companies, we see significant growth in our markets and customer budgets for our type of product and in our revenue," Kantrowitz said. Neoware benefits from having IBM's sales force pushing its products, says William Becklean, a securities analyst with Commerce Capital Markets. Commerce Capital does not own shares in Neoware, but helped the firm in a $12 million private placement of common stock to institutional investors in May. Neoware's IBM business should be "a significant contributor to the revenue growth over the next several years," Becklean said. Neoware has good visibility on its future growth because large deployments of thin clients are spread out over several quarters, he says.