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(No.1 High-Tech News Site in Japanese)

  • [Industry Forecast ’99] Demand for High-End Servers to Grow: Nihon Sun VP
  • January 8, 1999 (TOKYO) — BizTech interviewed Toshiaki Sugawara, vice president and representative director of Nihon Sun Microsystems KK, about the company’s 1998 business results and 1999 targets.
    According to Sugawara’s forecast for the 1999 economy, the total economy is still in the doldrums, but Nihon Sun Microsystems’ products, including servers, will show an upward trend.

    BizTech: How was the year 1998 for Nihon Sun Microsystems?

    Sugawara: Last year the Japanese economy was sluggish, but we could do good work. Especially, since the beginning of the last half, orders for the UNIX server products such as the “Sun Enterprise 6500” and “Sun Enterprise 5500” have increased sharply. In keeping step with the growing demand for server products, orders for storage products have increased.

    As a result, we could attain two-digit growth in revenue in 1998.

    BizTech: In 1998, investment cooled in the manufacturing and communications carrier industries. What do you think boosted the demand for servers?

    Sugawara: It’s true that none of the leading domestic manufacturers have increased their revenue. This is the case with other industries. In any industry the customer requests have been varied and exacting in various aspects. As one of the countermeasures, investments in information systems will be much more important in the future. We’ve succeeded in expanding demand for servers because we were able to satisfy such customer needs, I think.

    BizTech: Do you mean that you have succeeded in increasing sales to all industries?

    Sugawara: Yes, we’ve increased sales to all industries. It’s regrettable to say that we can’t announce the figures of sales in Japan due to our headquarters’ management policy.

    For your information, the manufacturing industry has accounted for the highest ratio of our total sales, followed by banks, communications, distribution, public utilities and education/laboratories. This order has not changed for the past several years.

    BizTech: What trends were seen in customer orders for products during the past year?

    Sugawara: The growth of large-scale server products. We’ve received orders, favorably and increasingly, for medium- and large-scale models such as the “Sun Enterprise 6500” and “Sun Enterprise 5500.”

    And besides, we are receiving so many orders for the ultra-large-scale model “Sun Ultra Enterprise 10000” that we are afraid production will fail to catch up with the orders. It is something we never experienced till several years ago that high-end servers sell tremendously like this.

    Watching such a market situation, we’ve seen since the beginning of 1998 that replacement demand for mainframes with UNIX servers is finally picking up.

    We hear that some sources say the domestic mainframe market is bottoming out, but we expect it to decline continuously in 1999.

    Especially now, some users plan to use a large-scale UNIX server to build a system in a scale that could not be built even with a mainframe in the past. We feel there are users who are uninstalling their mainframes partially due to the economic slump.

    BizTech: Do you believe that the same trends of 1998 will continue in 1999?

    Sugawara: Yes, we forecast that demand for high-end server products will grow continuously for the time being.

    And, we may expect to see signs of an economic recovery in the last half of 1999. We were in a severe environment in 1998. The difficulty will continue until the beginning of 1999, but I believe we will be able to see the ‘dawn’ in the last half of the year. If my forecast is true, we can expect a further sales expansion.

    BizTech: I’d like to say congratulations on the expansion of your server business. How are desktop models doing?

    Sugawara: The desktop models are growing in shipped units, but are falling in unit price. So growth in value terms is not as large as the server products.

    For the desktop models, we plan to reduce the product costs and lower the prices further in the future. We have so far provided high-end desktop models used for desktop publishing, computer-aided design and similar applications. In addition, we’ll market low-priced desktop models in the future such as a Java terminal.

    BizTech: What percentages do the server and desktop products make up of total sales?

    Sugawara: Our fiscal year begins in July. So, just half a year has passed since the 1998 fiscal year began. We can’t make a detailed report on the outlook value of FY98 (July 1998 through June 1999) at this stage. I assume the sales ratio of servers to desktops will be about 6:4 in FY98. Until FY97, the ratio of servers to desktops was 4:6. This means the ratio will be reversed in FY98.

    BizTech: U.S.-based Sun Microsystems Inc. acquired U.S.-based NetDynamics Inc. in 1998, and has been expanding the system integration business. Do you plan to push the SI business in Japan, too?

    Sugawara: Nihon Sun Microsystems has made it the prime business policy to avoid competing with domestic SI partners. This is also the policy of Sun Microsystems in the United States, and Nihon Sun Microsystems will not change this business policy.

    So, currently we have no plan to penetrate such businesses and compete with our SI partners. Regarding our business policy on NetDynamics, we intend to air it in early 1999.

    Related stories:
    ¥ Nihon Sun Microsystems Counters HP Japan’s Sales Data
    ¥ Nihon Sun Microsystems to Enter SI Business Using Java

    Clic k here for more New Year features.

    (BizTech News Dept.)

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