Windows 2000 Licensing Slows Down

The demand for Windows 2000 is settling down after an initial spike that may have been related to a rush of early adopters to obtain Microsoft Corp.’s flagship business operating system.

During a keynote speech at Windows World/Comdex in Chicago late last month, Tod Nielsen, vice president of the Microsoft (www.microsoft.com) platform group, said Microsoft licensed more than 1.5 million copies of Windows 2000 in the two months since the launch. The number is a combination of Windows 2000 Professional, Server, and Advanced Server licenses. The number also includes estimates from channel resellers, retail outlets, and PC manufacturers, but it excludes licenses acquired through enterprise agreements with large corporations and organizations.

Nielsen, along with Microsoft’s marketing and publicity materials, emphasized momentum when highlighting the number. Microsoft officials are pleased with the sales numbers Windows 2000 is putting up so far, a company spokeswoman says, and the company is emphasizing the 1.5 million figure in its financial statements for the first quarter.

Windows 2000 is leaving store shelves four times as fast as Windows NT 4.0 did when it was released in July 1996, Microsoft says. The company sold 375,000 copies of Windows NT 4.0 in its first two months of availability, the spokeswoman says.

Microsoft, however, made an earlier announcement that 1 million copies of Windows 2000 had gone out in the first month since the Feb. 17 launch. If both numbers are correct, licensing slowed to half from the first month to the second. Also, both numbers are far off the levels Microsoft achieved last year with Windows NT 4.0 shipments. Market research firm IDC (www.idc.com) estimates that Microsoft shipped nearly 2 million copies of Windows NT per month in 1999.

Microsoft has thus far been unwilling to discuss how the Windows 2000 shipments compare with new licenses of Windows NT 4.0.

Still, 500,000 units per month could represent a sustainable level on which Microsoft can base future growth in Windows 2000 shipments. If most of Microsoft’s 650,000 or more beta testers immediately moved to licensed copies of the new operating system -- a move encouraged by Microsoft through the use of a 120-day time bomb in the gold code -- that would account for about half of the 1 million licenses in the first month.

While the initial four times greater sales comparison with Windows NT 4.0 sounds impressive, Microsoft is releasing Windows 2000 from a different position in the market. Adoption of Windows NT has been accelerating over the last few years, and the installed base for Windows NT 4.0 is considerably higher than the installed base for Windows NT 3.5.1. Moreover, Microsoft positions Windows 2000 Professional as an upgrade for business clients using Windows 95/98, not just for users of Windows NT Workstation.

The lower adoption rate for month two falls in line with analysts’ expectations of slow adoption for Windows 2000 into the enterprise.

The Microsoft spokeswoman says the company is selling about 10 copies of Windows 2000 Professional for every copy of Windows 2000 Server or Windows 2000 Advanced Server. That translates to about 135,000 copies of Windows 2000 Server and Advanced Server. Microsoft has not broken out sales of Server versus Advanced Server. In the past, Microsoft officials say they’ve seen about a 10:1 sales pattern for Windows NT 4.0 Server sales vs. Windows NT 4.0 Server, Enterprise Edition, sales.

At Windows World, Nielsen disclosed that 64,000 Web sites are using Windows 2000 as their hosting solution, more than three times the 20,000 Web sites being hosted on Windows 2000 at the time of the Feb. 17 launch. According to Microsoft, the 64,000 hosted sites surpasses the number of sites hosted on IBM AIX, HP-UX, MacOS, or NetWare.

The numbers indicate that Microsoft is convincing Web hosters that Windows 2000 is a serious Web serving platform, with its enhanced reliability and integrated Internet Information Services 5.0. The Web site numbers roughly translate to one out of every two copies of Windows 2000 Server being used to host Web sites.

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Windows NT/2000 Adoption

First month (W2K sales) – 1 million copies

Second month (W2K sales) – 500,000 copies

First two months (W2K sales) – 1.5 million copies

First two months NT 4 sales (1996) – 375,000 copies