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  • Japanese PC Server Market Sees Steady Growth
  • June 8, 1998 (TOKYO) -- The PC server market is growing steadily in Japan, with total product shipments in 1997 rising nearly 40 percent year over year.
    Manufacturers and research companies forecast that the growth rate in 1998 will be 20-30 percent, thus intensifying the business competition for a larger market share. Major manufacturers are going to differentiate their products with their own multiprocessor technology.

    Market Growth in 1998: Up 20-30 Percent

    According to a survey by IDC Japan Ltd., the total number of domestic PC server shipments between January and December 1997 was 177,900 units, and total sales were 158.9 billion yen (US$1.15 billion). The number of units shipped was up 40.4 percent year over year, and sales volume was up 38 percent year over year. IDC Japan forecasts that total shipments in 1998 will be up 23.7 percent to reach some 220,000 units. PC server makers also estimate a growth rate of 20 to 30 percent.

    NEC Corp. held the largest share of 23.4 percent in units shipped in 1997 according to a survey conducted by IDC Japan, followed by four companies: Fujitsu Ltd., 13.5 percent, IBM Japan Ltd., 13.5 percent, Compaq Computer KK of Japan, 12.4 percent, and Hitachi Ltd., 10.2 percent.

    Each maker is competing to achieve their own high sales goals, being well aware that losing the PC server market will lead to losing the desktop PC market for business use (See table ).

    Major Suppliers: Support Level is Key to Winning

    As for companies with large shares such as NEC, Fujitsu, IBM Japan and Hitachi, strong support reinforced by substantial sales staff and system engineers is an engine to promote their sales.

    Fujitsu is determined to be a winner by committing the dominant number of sales stuff and SEs and gain the highest share in two years by mobilizing some 20,000 SEs, the largest number among domestic competitors, said Minoru Kanda, manager of the system sales promotion division.

    Shiro Fujimoto, marketing management manager of IBM Japan's PS Brand Strategy, said IBM Japan aims to double its share on a unit volume basis by tying its dominant legacy systems to its main strategy."

    While coping with those challenges, NEC as the top shareholder is still formidable, commanding major dealers and agents and holding tight sales channels to small- and middle-sized enterprises.

    "Although Fujitsu is overwhelming NEC in terms of the number of SEs and support staff members, NEC can still be a strong rival to Fujitsu by mobilizing SEs and support personnel from cooperative dealers and system integrators. It is not simply the number of a staff in our company that counts. The important thing is the level of support for dealers," said Hisanori Yamauchi, Express Server Business manager at NEC.

    Compaq Computer Sees Share Decline, Does Business Merger for Leverage

    Compaq Computer of Japan cannot be neglected as it occupied the largest domestic share until three years ago. However, nowadays the market isn't expecting much from Compaq Japan. Since the share of Compaq has continued to fall, Hewlett-Packard Japan Ltd. and Dell Computer Corp. of Japan recently declared that their target is to replace Compaq machines, making clear their challenge to oust Compaq Japan from its high market position.

    The primary reason for Compaq Japan's share fall lies in its sales channel. The company to date has had only indirect sales channels through dealers and a weak system for sales and supporting activity, experts say. Compaq Japan admitted its weak point. "Indirect sales cannot give us correct and real figures of users. It does not help us comprehend the state of usage by users," said Masao Morimoto, manager of Compaq Japan's Enterprise Computing Division.

    There is a possibility that this weakness can be conquered by Compaq's merger with Tandem Computers Japan Ltd. in January 1998 and another planned merging with Digital Equipment Corp. Japan in the future.

    Compaq Japan has already decided to get orders for a project by using Tandem's existing direct sales force and introduce systems in cooperation with dealers and SI companies. However, PC servers will be shipped through dealers, for it will cause unnecessary duplication of business practices between Compaq Japan and current agents and SI companies if Compaq sells servers directly to clients.

    In this context, Hajime Takayanagi, president of Compaq Computer of Japan, said his firm is dealing with a big project for user Super Parallel Server Himalaya, which plans to purchase PC servers valued at several hundred million yen (US$2-3 million).

    There also are emerging entrants to the server market. They are manufacturers such as Dell Computer of Japan and Gateway 2000 Japan Inc. that have been growing by mail-order sales of systems. They do not offer the intimate support usually offered by major makers, but the new entrants will compete with quick delivery of inexpensive PC servers.

    Dell Computer started to ship PC servers on May 18 with a strategy to actively sell them to existing PC clients. Dell has a strong reputation among work groups in large-scale enterprises as well as small- and middle-sized enterprises, and it anticipates sales to these potential clients.

    Differentiating Products by Multiprocessors

    The function and quality of a PC server are important for gaining a reasonable share in the PC server market.

    However, it is not easy to provide a PC server whose selling point is functionality. Disk arrays can functionally differentiate products, but they still fall short in their appeal to clients choosing a PC server.

    What dominant PC server manufacturers consider an area of concentration for differentiating their products is a machine compatible with multiprocessors for enterprises.

    As long as a server is built using chip sets provided by Intel Corp., it can currently mount at most four Pentium Pro or two Pentium II processors. Therefore, makers are developing a multiprocessor machine with breakthrough functions that go beyond that restriction so that they can demonstrate their level of technology and gain confidence from clients.

    NEC now has a PC server that can mount up to eight Pentium Pro processors, while Fujitsu developed a PC server with up to six Pentium Pro processors. NEC adopted a chip set called AQUA that is an original design. Fujitsu is using the so-called Champion chip set developed by Reliance Computer Corp. of the United States, a subsidiary of Fujitsu.

    Both companies also revealed plans to develop a new type of PC server with a Pentium II Xeon, Intel's new processor that performs at 400MHz to 450MHz. The number of Pentium II Xeons to be mounted on NEC's server is reportedly 16, and that on Fujitsu's server is 16 to 32.

    In the U.S. market, Hewlett-Packard Co. succeeded in developing and manufacturing a PC server which can mount a maximum of eight Pentium Pro processors using a chip set from Axil Computer Inc. of the United States. However, HP has not provided this product in Japan.

    Table: Sales targets of major PC server manufacturers/ vendors

    (return to news)

    (Nikkei Byte)

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    Updated: Sun Jun 7 01:38:22 1998