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Apple Plunges Back into Servers

By Charles Haddad Think of Apple's new Xserve as a metallic Band-Aid, stanching the flow of Mac users to server-based networks driven by Linux or -- gasp -- Windows. As server-driven computing has taken hold in schools and offices, Macs have increasingly been out of sync. Not surprisingly, growing numbers of frustrated Mac users in offices and schools have abandoned the platform.

The Xserve should make many of those who are considering jumping platforms think twice. "Right now, Mac users have no choice, really, but to turn to Windows or Linux in building a network in a school or business," says David Bailey, a Mac analyst at Gerard Klauer Mattison. "The Xserve should give Apple a greater share of its customers' spending."

SWEET DEAL. Not only is the Xserve powerful, it's also priced to move, as they say in retail. Starting at $3,000, the line features Apple's powerful G4 processors and comes with up to 480 gigabytes of storage. As one information technology manager gushed to me, "I can buy two of these babies for what it would have cost for one comparable IBM server." Making the Xserve sweeter yet, Apple is also offering an unlimited license of OS X server software, priced at $1,000 if bought separately.

Price is important. IT managers, especially those running Linux, like to buy the cheapest hardware to configure their networks. That's truer than ever in this sluggish economy. Sales may be down at most companies, but internal demand for ever-more computing firepower just keeps increasing. Xserve isn't the cheapest hardware out there, but it offers the best buy for the price, say many IT managers.

Clearly, Apple thinks it has a winner. "The Xserve does address a vacuum in our market," says Phil Schiller, Apple's senior vice-president for worldwide product marketing. "Customers have been begging us for something like this." Indeed, Apple designed the Xserve after conducting extensive market research that included asking customers to describe their dream server.

HEADACHE CURED. Schiller sees the Xserve as a triple marketing play. First, it takes away a reason for all-Mac shops to leave the platform. Their networks are now built out of desktop Macs running OS X Server software. That solution works, but it's both expensive and inefficient. Nor can desktop Macs be stacked in racked columns for combined processing power. The Xserve can.

Second, Schiller sees Xserve shoring up the gray market of Mac users within PC organizations. The Xserve gives these schools and businesses less incentive to dump their Macs, as they've been doing in growing numbers in recent years. In hybrid networks, IT managers could employ the Xserve for its Mac users, because it can talk easily to its Linux and Windows counterparts. This was a major headache in the past.

And lastly, Schiller believes the Xserve will tempt some PC shops to switch to the Mac, especially those who've already jettisoned Windows for Linux. Winning over new adherents won't be easy or quick, Schiller readily concedes, but it's doable.

FIVE-YEAR WAIT. Wishful thinking? Certainly many Mac renegades in PC-dominated IT departments are salivating at the prospect of a strong Apple server product to pitch to their bosses. But I'm afraid that, no matter how good the Xserve, it will be an uphill sell in most businesses.

For one thing, Apple has been out of the server business for five years. And before that, it went in and out of the market, which eroded confidence in the company's ability -- and staying power.

Today, there's little institutional support for Apple. Most IT managers have been trained on Windows machines. And Microsoft has done a good job of persuading IT managers that the Mac OS isn't serious business. Ironically, OS X's stunning interface only reinforces that impression. To IT managers, OS X's eye candy consumes precious processing power that could be better used speeding the network as a whole.

CLASS ACT. I think the Xserve's biggest potential market is schools. This is one area where the Mac still dominates, although it's fast losing the lead. A server product would greatly help to shore up Apple's position.

Schools are becoming increasingly dependent on computers, using them for everything from posting homework assignments online to letting kids do research on the Net. But schools struggle with how to join all their new machines together. The powerful, relatively inexpensive, and easy-to-use Xserve could be the glue they're looking for -- and it might be just what Apple needs to persuade administrators to stick with the Mac. Haddad, Atlanta-based correspondent for BusinessWeek, is a long-time Apple Computer buff. Follow his weekly Byte of the Apple column, only on BusinessWeek Online

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