Micron ASP Push: Last Chance?

PC maker Micron Electronics Inc. will transform its HostPro Inc. subsidiary into a full-fledged ASP later this year, a move that experts say may be a last-ditch effort to save the company.

The move will make Micron the first mainstream computer manufacturer to become an application service provider. While larger players such as Dell Computer Corp. and IBM offer hosting and Compaq Computer Corp. invested $500 million in Cable and Wireless plc.s ASP division last summer, none offers hosted applications directly.

However, analysts and customers alike are skeptical about Microns ASP plans, especially since the PC industry faces an industry slowdown.

“If youre a hardware company, does that make you good at selling software as a service?” asked Lew Hollerbach, an analyst with Boston-based Aberdeen Group Inc. “The smart ones are realizing they cant be in that business because its not what theyre good at.”

“Its not the kind of thing you would set out to do unless youre desperate,” said Melanie Posey, of International Data Corp., in Framingham, Mass. “Theyre two fundamentally different businesses. I dont know if its a bundle people want.”

But Joel Kocher, CEO of both Micron, of Nampa, Idaho, and HostPro, of Los Angeles, claimed the ASP plan has been two years in the making and is not a reaction to recent market conditions.

HostPro plans to sell a hosted version of Microsoft Corp.s Exchange to small and midsize businesses beginning early this year, with future offerings of human resources, payroll, accounting and other office applications.

Micron, the No. 17 PC maker, according to IDC, was “in trouble” two years ago, Kocher said, but has since built HostPro into one of the top hosting companies. “We know that were a much smaller player in a consolidating marketplace,” he said. “This is not just a sidebar. This is a transformation strategy.”

He predicts that within five years, enterprise computing will be dominated by browser-based software accessed through thin-client terminals, sans PCs. “Theres no point in fighting it because its absolutely going to happen,” he said. “[Its] a huge threat to the PC model.”

Kocher said HostPro will take advantage of the Micron name, which is already well-known among corporate buyers. But Sam Avera, technical architect for 1,000 users in the Washington Department of Aging and Adult Services, in Seattle, isnt so sure. “How am I supposed to know what the track record is when they dont have one?” Avera asked.