The LAN market: segments at a crossroads

Computer Industry Report, August 31, 1995

Hubs

The LAN hub market is about to reach its prime. The good news is that in 1998 more money will be made on hubs worldwide than ever before. The bad news is that following this peak the market will steadily decline as prices fall (for mainstream ethernet and token ring products), technology matures, and the percentage of PCs connected to LANs reaches saturation. In the United States, the LAN hub market will peak even sooner -- in 1996.

From a technology standpoint, sluggishness in the ethernet and token-ring segments will cause the overall market to shrink. High-speed hub sales represent an opportunity, however, since shipments should swell as customers migrate to faster network technology. Thus, to be successful in the U.S. LAN hub market, vendors must aggressively transition to the high-speed hub offerings (for example, fast ethernet, switched ethernet, and ATM) while also positioning themselves in other growing LAN backbone opportunities (like switches). Regions outside the United States will remain growth markets for several years, even for basic ethernet and token-ring technology.

Definitions

IDC forecasts the following hub products: ethernet and token-ring LAN hubs (chassis, stackable, and unmanaged); network management modules; 100BaseT, 100VG AnyLAN, FDDI/CDDI hubs; workgroup LAN switches (switched ethernet/token ring); and workgroup ATM switches (25/155Mbps). The following products are not included: backbone LAN switches (switched ethernet/token ring/ FDDI), backbone LAN ATM switches, router cards in hubs, remote-access cards in hubs, terminal server cards in hubs, file servers in hubs, and network-management software applications.

Microsoft's Strategy: $100/PC/Year

With the launch of Windows 95, Microsoft has defined its OS strategy beyond the earlier "Windows everywhere" campaign to focus on a few specific customer/market segments. Instead of highlighting a questionable effort to put Windows on a multitude of different platforms, Microsoft is focusing on providing a few basic customer segments with compelling operating systems, which it will regularly upgrade. In addition, the vendor's revenue benchmark has come to light: $100 per PC per year.

In the past, Microsoft talked of having Windows on desktops, servers, pen computers, set-top boxes, office equipment, etc. Perhaps someday the software giant will achieve this lofty goal, but today its mainstream OS strategy is far simpler, and includes a mainstream desktop OS (Windows 3.x and 95), a workstation-class OS (Windows NT Workstation), and a server OS (Windows NT Advanced Server).

Windows 95 will extend Microsoft's dominance in mainstream desktop OSs. Even from an installed-base perspective (as opposed to unit shipments), by the end of this year 9.5% of PCs worldwide (nearly 20 million PCs) will already be running Windows 95 (compared to 46.8% for Windows/DOS, 22.4% for DOS only, 8.0% for Mac OS, and 5.4% for OS/2). In 1996, Windows 95's share of the worldwide PC installed base will jump to 27.4%, or 68.5 million units (compared to 35.2% for Windows/DOS, 15.6% for DOS only, 8.1% for Mac OS, and 6.7% for OS/2). The migration in shipments of new systems will, of course, be even more aggressive. In 1996, a whopping 62.7% of the PCs shipped worldwide will run Windows 95.