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Microsoft slashes thin-server prices by half (1999)

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San Francisco (January 21, 1999) -- Microsoft Corp. has announced new licensing terms for its Windows Terminal Server (WTS) software that cuts the cost of deploying a Windows terminal by as much as a half, the company said this week.

The move comes in response to criticism from users and resellers that Microsoft's licensing terms for WTS were expensive and inconsistent, admitted John Frederiksen, group product manager for Windows NT.

The shift in strategy, which also includes new multi-user packaging options aimed at small and medium-sized businesses, could help ignite a boom in WTS shipments in 1999, according to one industry analyst.

WTS, formerly known as Hydra, is based on technology licensed from Citrix Systems Inc. and forms the basis of Microsoft's thin-client strategy. The server software allows multiple copies of Windows software to be run on a single server and be accessed by a variety of client devices including Unix workstations, older PCs that don't run 32-bit Windows applications, and handheld appliances.

The main difference with the new licensing scheme is that customers are no longer required to fork out US$250 for a Windows NT workstation license for each WTS client. Instead, Microsoft has introduced a new WTS client access license (CAL) priced at $109. As before, customers must still purchase a separate Windows NT server CAL, priced at $40, Frederiksen said.

The net result is that users pay around $150 for the software license to deploy each Windows client instead of about $300, Frederiksen said. The new WTS CAL is due to ship Feb. 1, with localized versions for French, German, Spanish and Japanese markets due a month later.

When Microsoft releases Windows Server 2000, expected later this year, WTS will be bundled with it at no additional cost, Frederiksen said. "Basically we're merging two NT server products together."

Microsoft originally pitched WTS to enterprise customers, but the software is proving equally popular among small and mid-sized businesses as well, he said. To better target those customers, Microsoft also introduced CALs in 5-user, 10-user and 25-user packages, priced at $1,299, $1,899 and $3,999 respectively. They will be available in 60 days to 90 days, Frederiksen said.

Customer surveys show that WTS deployments ramped up steeply late last year, according to research from Zona Research Inc. The trend is likely to accelerate in 1999 as users begin to realize the efficiencies and cost-savings of centrally managing software, and as part of an overall trend towards "access-based applications," said Zona analyst Greg Blatnik.

Further fueling momentum, Wyse Technologies Inc. in a separate announcement this week said it will cut prices in its WinTerm thin-client terminals by as much as 25 percent. The company said increased shipments of the product made the price cuts possible.

However, Zona doesn't think growth in the terminal clients market will cause PC sales to drop.

"What this does is create more options for businesses, it gives them another model for accessing applications and for offering different services, and the model resonates strongly in a number of organizations," Zona's Blatnik said.

Microsoft also introduced the Terminal Server Inter Connector, software based on WTS that enables companies to "publish" Windows applications on the Internet so they can be accessed by up to 200 concurrent users.

"If you had an extended intranet, and external customers or partners or suppliers or buyers that wanted to access applications using the Internet -- they (Microsoft) now make that possible. That's a big deal," Blatnik said.

To keep Inter Connector from cutting into its WTS licensing revenues, Microsoft requires that none of the 200 users are company employees. Companies could potentially try to get around buying single-user licenses by allowing workers to access applications through Inter Connector, Frederiksen acknowledged.

"It's true that (the license) is just a piece of paper, so we depend on customers acting honorably," he said.

Internet Connector will be licensed as an add-on to Terminal server, priced at $9,999, and is also due to be available Feb. 1.

Separately, Citrix this week said it will release a new version of its MetaFrame server software that also allows concurrent non-employees to access Windows applications over the Internet. Pricing and availability will be announced at a later date, the company said.