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To: Thomas A Watson who wrote (4789)	4/28/1998 3:35:00 PM
From: Michael E. Hohmeyer	Read Replies (1) \| Respond to of 14451

Here is a interesting story about HP w.r.t NT vs. UNIX. Why keep selling products with slow to no growth, when faster- selling options can take their place? Hewlett-Packard Co. has its reasons. In many industries, low-end Unix workstations are being replaced by high-end PC workstations. These machines run Microsoft Corp.'s NT operating system and use Intel Corp. chips. They sell for less than most low-end Unix machines and offer similar performance. But NT is a newcomer, and the more-entrenched Unix generally is considered more powerful. HP has a fast-growing NT workstation business - and a "steady" Unix business, says Patty Azzarello, marketing manager for HP's Workstation Systems Division. She wouldn't reveal numbers, but concedes that the low-end Unix workstation market is flat. Why not exit that market, which analysts say will decline over the next few years, and focus on NT machines on the low end? "HP's strategy is to provide a choice of Unix or NT, and continue to invest in both businesses to provide customers choice in the future," Azzarello said. Azzarello and Barry Crume, an HP product marketing manager, recently spoke with IBD about HP's plans to stick with low-end Unix. IBD: Are some HP customers torn between choosing Unix or NT workstations? Azzarello: We're not finding a sense of competition between Unix and NT. Customers come to us having made that choice already. The NT market is growing rapidly, but not at the expense of Unix. The growth of NT workstations is largely due to "PC upsizers." These are companies using standard PCs that need a more richly configured PC as a workstation. IBD: But market analysts say NT workstation sales have grown at the expense of Unix workstation sales - especially at the low end. Azzarello: There have been segments of the historic Unix workstation market that have moved to NT. Software developers and financial service companies have moved to NT. That was definitely at the expense of the Unix workstation market. But highly technical (companies) that build automobiles and airplanes, for example, haven't been threatened by NT. IBD: Why are these customers still buying low-end Unix workstations? Crume: Customers have been telling me they're sticking with Unix (because) they have a very large investment in it. Their engineers trained on it. They've purchased software tools on Unix and have internally developed tools on it. All of their data lives on Unix. And many Unix customers are discovering PC workstations aren't inexpensive once you get enough memory disk space and (powerful) graphics chips on them. When you make it comparable to a Unix workstation, it starts to cost the same as a Unix workstation. IBD: How long can HP keep selling products that have shown no sales growth or signs of improvement? Crume: We have no intention of dropping our (lowest-end) Unix workstation or any other low-end product. When I'm selling products to a company that makes airplanes, autos or something like that, they need to buy a range of products - low, medium and high end. It's an applications- based market. Companies buy all three classes of products. Whether the financials go away for the (low-end Unix workstation market), we will still sell a range of products. We make real profit dollars (on low-end Unix workstations) that show up in the company's earnings at every price point. That looks to be continuing in the future. IBD: But competing NT products are racking up double-digit growth. How can Unix products compete? Crume: We are pursuing efficiency in a number of ways to be much closer to a PClike cost structure. We've achieved a number of operations efficiencies. Outsourcing our manufacturing is certainly one of them. We've been able to reduce many of our costs of (selling) goods. And we've been sharing some (component) commodities with our PC product lines. Our 19-inch and 21-inch monitors also are used in our high-volume PC products. We're also sharing disk drives and memory. As a result, we recently reduced our low-end Unix workstation prices from 23% to 32%. IBD: Are there any plans to shrink the low-end Unix workstation product line? Crume: Not any time soon. We currently have two classes of products: our B132+ entry-level product and our B180L, which is just above that. They will remain for sale for the next 12 months. We will upgrade the products, but I'm not able to share the details of what the specific packages will look like. IBD: What about older low-end models? Crume: That product line (is) our Series 700 . . . . It remains an attractive low-end product. We still sell it to major accounts. We plan to continue manufacturing those for our very large customers. We just had a major deal for them go through. (But) those products are being discontinued as we speak. We're reducing the availability of them and taking them off our price lists. We first introduced Series 700 in 1991. We plan to sell mostly the B-class products. IBD: Do you plan to keep advancing the B-class product line? Crume: Yes, we have plans to keep it advancing. I can't comment on the performance improvements, however.