The state of the Sun clone market Is Darwin along with Windows NT a one-two punch? By Stephanie Steenbergen

March  1998

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San Francisco (March 16, 1998) -- Sun's January introduction of its low-priced Ultra Darwin line, coupled with a report that sales of Unix workstations are shrinking make one ask: How can Sun clone vendors compete in a waning market when their major value-add once was lower prices? It seems that a once healthy niche market has seen it's golden days come and go.

Early this year, International Data Corp. (IDC) reported that the number of Unix workstations sold dropped seven percent in 1997. The report says 660,000 Unix workstations were sold in 1997 as opposed to 713,000 systems sold in 1996. Meanwhile, 1.3 million NT workstations shipped in 1997 -- an increase of 80 percent over the previous year.

"To be honest I would imagine that, if you're a Sun clone vendor at the moment, you are probably having a very tough time," says Peter ffoulkes, principle analyst at research firm Dataquest.

"It's hurtin'," says Karen Seymour, an analyst at IDC, of the Sun clone market. "The smaller clone vendors are not doing so good right now," she says. She attributes this partially to Sun's new Darwin product line.

"Darwin's doing pretty well," says Seymour. "[Sun] hasn't shipped a ton of them yet, but customer response has been good."

While the SPARC clones were once seen by Sun as a means to expand its SPARC technology, times have changed. Sun introduction of its Darwin line shows a desire to take the biggest bite of the Unix-based computer market that it possibly can.

"The Unix marketplace is definitely going to keep alive for a long while," says ffoulkes. "But it is likely to be dominated by companies that have a large installed base: Sun, HP, and IBM." He says that Unix vendors are feeling the squeeze of NT into their part of the market. "And as long as the pricing is right from the primary vendors," ffoulkes says customers are most likely to purchase from the well-known companies with established reputations.

Seymour's attitude about the overall Unix market is also bullish. She concedes that the market is weakening a bit, but, "It's a $10 billion industry, and $10 billion is a lot of money," she says.

What are the clone vendors saying?
Tatung, a company Seymour cites as being one of the strongest in the Sun clone market, introduced its COMPstation U10-300 in late February. The product will ship sometime this month.

Standard COMPstation U10-300 configurations include 512 KB of external cache, 64 megabytes (MB) of memory, which is expandable to one gigabyte (GB), one 4.3-GB hard drive and one 1.44-MB floppy drive, and a PCI graphics card. Its price starts at $4,995 without a monitor.

Tatung's president, Kam Chan, says the impact of Sun's Darwin line to the company's sales has been minimal. But the COMPstation U10-300 was built as a competitive product to Sun's new low-end Ultra 5 and 10 Darwin products.

Sun's Ultra 5 is equipped with a 270-MHz UltraSPARC IIi RISC processor, 256 KB external cache, 64 MB of memory (expandable up to 512 MB), a 4.3-GB hard drive and 1.44-MB floppy drive, 8-bit accelerated graphics, and three PCI I/O slots. It starts at $2,995, without a monitor.

The Ultra 10 has a 300-MHz UltraSPARCIIi processor, 512 KB of external cache, 64 MB of memory (expandable to 1 GB), one 4.3-GB hard drive and one 1.44-MB floppy drive, and four PCI slots. It start at $6,395 without a monitor.

"The Darwin family has opened up new opportunities for the SPARC market," Chan says, "As Sun's market share grows, the opportunities available to the clone companies can only increase."

RDI, makers of Unix-based laptops, released it's UltraBook product in October 1997. The UltraBook has either a 167-MHz or 200-MHz UltraSPARC processor, 32 MB to 512 MB RAM, and up to three 3-GB removable disk drives.

Has Darwin affected RDI's sales? Cyrise Sanders, manager of RDI's marketing department says, "Our goal with this product was to offer a desktop comparable system in a portable format. We also believed that the price premium over an equivalent desktop system needed to be minimal (i.e. not the 100 to 200 percent you see in the PC portable market) so we've aimed at 30 to 50 percent. Darwin just reaffirms the importance of the pricing." Price for the RDI UltraBook starts at $11,995.

Aries Research makes customized platforms using SPARC technology. Dr. Lawrence Kou, president of Aries Research, says the health of the Sun clone market is, "very poor if not dead already."

Dr. Kou feels that the customized market "still [has] some edge in the Internet-related customized product market. However, Intel/Microsoft's competition is very tough. The root to this problem is Sun's position toward open systems. It has effectively stopped any attempt to invest in the SPARC system business."

"If one tries to provide a less expensive standard platform (clone approach)," says Kou, "then he would realize the following: SMCC (Sun Microsystems Computer Corp., Sun's hardware arm) occupies the low-end SPARC market by lowering price to a level that it is impossible to produce the standard platform even to match SMCC's prices based on SME (Sun Microelectronics)'s chip prices; On any model above the very low-end models, the technology is not open."

Integrix, makers of SPARC-based workstations, servers, and peripherals, declined comment for this story.

Will they move to NT?
Axil, a company that at one time produced both Windows NT servers and SPARC workstations, has scaled back and shut down the SPARC side of the business.

"The business on the SPARC side did just get to be more and more difficult," says Bob Nilsson, vice president of marketing for Axil. "There was a time when Sun wanted partners to make compatible systems, but that time has passed. Sun made it too difficult."

Dataquest's ffoulkes says, Sun has never had a very kind relationship with its clones vendors. "It's purely a matter of survival as far as Sun is concerned," he says.

Nilsson says Ultra Darwin is "a final nail" in the competitors' coffin. He feels Unix still has a strong presence in the server market, but he says, "I don't think Unix is long for the desktop."

ffoulkes wonders if the Sun clone vendors are changing their product offerings from Unix to NT. "I am speculating," says ffoulkes, "But it wouldn't surprise me if a lot of these clone vendors are going after the NT market."

Resources

• Darwin press release http://www.sun.com/smi/Press/sunflash/9801/sunflash.980113.4.html
• Aries Research http://www.ariesresearch.com
• Axil http://www.axil.com
• RDI http://www.rdi.com
• Tatung http://www.tatung.com
• Integrix http://www.integrix.com

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