Hewlett-Packard Co. is quietly scaling back its thin-client program despite a booming market for the products, and Network Computing Devices Inc. (NCD) stands to be the potential winner.
Late last week, officials of Mountain View, Calif.-based NCD said HP has begun endorsing NCD as its preferred supplier of thin clients. This was preceded a few days earlier by a notice on NCD's Web site welcoming HP sales personnel and customers to purchase NCD's X terminals.
An HP spokeswoman denied that the company has signed any deals with any thin-client manufacturers. However, she did admit the company is scaling back its thin-client program without exiting the market.
Instead, HP is approaching thin-client computing from a server-centric model, she said. This includes possibly reallocating resources from R&D and marketing of thin clients to the company's NT server side.
No decisions have been made, she said. In any case, HP is committed to supporting its existing products and customers.
NCD is working on a number of situations with HP customers, said John De Santis, senior vice president of sales, marketing and service for the company.
NCD's relationship with HP started a few weeks ago, said De Santis, when HP asked if NCD would be able to service the company's X terminal customers. "HP had been working for years to obsolete their X terminals," he said. "They asked if our sales force could support their customers. Of course, we said yes. So they gave our name to HP sales and technical people around the world."
One of the NCD products was a Windows-based Terminal (WBT) product that was offered to HP customers as an X terminal. However, last week HP began offering the unit as a thin client as well, said De Santis.
According to industry sources, HP's current line of thin clients is manufactured by Wyse Technology Inc., San Jose, Calif. A Wyse official would not confirm his company is HP's OEM supplier.
Scott Johnson, president of ISC Distributors Inc., a Bozeman, Mont.-based thin-client reseller, said his understanding is that HP will drop the thin-client product line and let Wyse and other vendors handle the business.
"HP will probably focus on making sure their Net Servers run the Microsoft Terminal Server and the Citrix applications well," Johnson said. "Basically, HP is saying the margins are too thin to be a manufacturer in this area. They're saying if they can't make a profit on it, they don't want to put their name on it."
One reseller who asked not to be identified said he is seeing some major changes quietly going on at HP that are either a result of the new CEO coming in, or the old CEO leaving. "Anything that's not a big profit maker HP is dropping," he said. "Terminals are not profit makers."
Sales of thin clients this year are about double those of 1998, said Greg Blatnik, vice president of Zona Research, Redwood City, Calif., and should continue that growth in 2000.
Several factors are causing the boom, said Blatnik. "Windows 2000 will be the big driver next year," he said. "But for this year, the factor has been new applications, including Microsoft Terminal Server, and new technology from Citrix [Systems Inc.]. Also, prices were adjusted by Microsoft [Corp.] earlier this year to make Terminal Server more attractive."
HP's scaling back of its thin-client business fits in with recent ISP and legacy-free PC announcements, said Blatnik. "If HP said it wants to focus on server-centric computing, it may be code talk," he said. "You can take a PC and turn it into a thin client. HP has the skills to take a PC and make it foolproof and easily managed, and then you have a server-centric PC."
