CES: Microsoft still trying to ignite Windows home server market

It signs up two vendors, Via and Shuttle Computer, to build Windows Home Server systems

Microsoft Corp. today said two smaller Taiwanese hardware makers will ship PCs preloaded with its year-old Windows Home Server operating system, joining PC market leader Hewlett-Packard Co. and others.

At the International CES, Via Technologies Inc. and Shuttle Computer Group both plan to show off two models of home servers, which are meant to be easily managed central repositories for storing and backing up photos, movies and other files.

Known for its stylish, bookshelf-size PCs, Shuttle's two home servers, the SH-K4500 and the SH-K4800, are also compact, Intel Celeron 450-powered (single-core 2.2-GHz) systems with 1GB of RAM that can hold either two or three hard drives.

Via, meanwhile, will offer one mini-desktop PC (ARTiGO A2000) similar to Shuttle's that holds up to a pair of hard drives, and one mini-server rack (NSD-7800) that can hold up to eight hard drives for storage-hungry users. Both run Via's modest C7 processor along with 1GB of RAM.

By comparison, the HP MediaSmarts, including new Mac-friendly models introduced last week, use 2-GHz Celeron CPUs, offer 2GB of RAM and hold up to four hard drives.

Windows Home Server was released in the fall of 2007 after a major buildup by Microsoft.

A modified version of the business-oriented Windows Server 2003, WHS either comes preinstalled on specially built home server systems or can be bought for about $150 and installed by users on any PC.

Reviewers such as Computerworld's Preston Gralla say WHS is a "surprisingly powerful networking tool that offers some of the sophisticated networking capabilities you would expect from big-boy servers," while doing "a very good job of doing most of the things that home users need."

Such praise has yet to translate into a large ecosystem of WHS vendors.

Besides Shuttle, Via and HP, Fujitsu and a European vendor, Tranquil, are among a handful of larger PC makers building WHS machines today.

That pales in comparison to the massive number of hardware makers shipping Windows PCs.

Nor has it translated into huge sales of WHS, either. IDC predicted in a report last spring that only about 80,000 home servers, most of them WHS systems, would be shipped worldwide in 2008.

Home servers remain "a small market even now," said IDC analyst Richard Shim, one of the co-authors of the report, in a recent interview.

Shim sees strong long-term demand for home servers. His report predicts that 1.1 million systems will ship worldwide by 2012, mostly to consumers in developed countries. However, Shim said the economic downturn could hurt sales in the near term.

"This kind of networking product is a convenience," he said. "For many folks, this is the first thing they'll drop when the dollars get tight."

Another analyst, Joyce Putscher of In-Stat, said that despite a tight online community of early adopters evangelizing WHS, the product remains unknown to mainstream consumers.

"I'm not seeing a marketing push when I go to Best Buy or Wal-Mart," she said.

WHS systems aren't expensive. HP's two latest MediaSmarts cost $599 for 750GB of storage and $749 for 1.5TB, while Shuttle's two models start at $450 and $499 for 500GB. But they still face heavy price pressure from Linux-based home servers and network-attached storage (NAS) gear such as the the LinkStation Mini from Buffalo Technology, which offers 1TB of storage for as little as $330. Such NAS products are increasingly coming with built-in network management and backup features, she said.

Price pressure was one reason Iomega dropped plans last spring to release a WHS system.

In a phone interview late last month, Steven Leonard, senior product manager for Windows Home Server at Microsoft, conceded that the "market is very early."

"There are a number of different analyst firms. Some of their predictions are under and some are over what our expectations are," Leonard said.

WHS is selling in 50 countries worldwide, most strongly in Canada, Scandinavia and especially Japan. "We're pretty encouraged by the reception of the market," he said.

Leonard said the WHS ecosystem is growing, citing the Via and Shuttle deals, sites such as WHSaddins.com, where users can download more than 70 WHS add-ons, and new digital photo frames that can easily receive streamed images from Windows Home Servers with minimal setup.

He rebuffed suggestions that WHS servers are threatened by cheaper NAS gear, as well as the argument that consumer belt-tightening is hurting WHS.

Home servers, Leonard pointed out, help enable low-cost family activities such as digital scrapbooking.

"The value of your digital memories isn't diminished because of the economy; it's probably heightened," he said.

Leonard declined to confirm a report that Power Pack 2 of WHS would arrive in mid-2009. Power packs are similar to service packs for Windows, but they include many features in addition to bug and security fixes.

Copyright © 2009 IDG Communications, Inc.

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