America's Computer System Builders Demonstrate Marketing Muscle and Optimism in New Survey by Phoenix Technologies and NASBA.

Business Editors/High-Tech Writers

Gartner System Builder Summit

ORLANDO, Fla.--(BUSINESS WIRE)--March 17, 2003

Industry Survey Says White Box Manufacturers Stay in the Black

by Catering to Under-served Customers with Customized Solutions

North American system builders, a powerful manufacturing segment accounting for more than one-third of U.S. PC sales, voice optimism about 2003 technology sales and express strong views about new technologies and customer hot buttons that will drive the U.S. market. These and other insights are part of a major new survey report released today by Phoenix Technologies, NASBA -- the Association of System Builders and Integrators, and the CMO (Chief Marketing Officer) Council. The study, Thinking Out of the White Box, indicates system builders are looking for partners and innovations that can further differentiate products, improve user productivity and security, and reduce the high cost of customer support.

Based on responses from more than 600 system builders, the study was unveiled today to coincide with the Gartner System Builder Summit. It underscores why a huge segment of today's technology marketplace -- as much as 58 percent worldwide -- buys from this channel.

System builders, also known as "white box" (non-branded) manufacturers, custom configure, integrate, install, and service a wide range of non-branded servers, desktops, notebooks, handhelds, digital wireless devices and information appliances. These white box makers say their ability to respond more quickly to customer needs, provide greater technical expertise and offer custom configuration and installation has created a strong competitive advantage with customers and markets that are under-served by leading brand-name providers.

Some Key Findings:

-- Unit shipments and sales in all product categories are expected to increase in 2003. Information appliances and tablet PCs will experience the fastest growth rate.

-- Wireless is seen as the hottest technology driving sales in the system builder channel.

-- The top identified sources of software and components to the system builder community are Microsoft, Intel, AMD, Seagate, and HP.

-- System builders report that, on average, 45 percent of their sales come from the small business market. Home consumers are a major a market, averaging 37 percent of their sales.

-- System builders cite customer-centric services and support as the top value-added offerings they provide; including custom configuration and installation (95 percent), field maintenance (75 percent), diagnostics and recovery (71 percent), help desk operation (66 percent), and security (31 percent).

The top issues shaping market demand in 2003 are:

-- Reducing IT costs

-- Establishing and supporting wireless connectivity

-- Improving user experience

-- Enhancing user productivity

System security and support tools were high on the list of top software specified by system builder customers; system integrity, backup and recovery, remote control/management, and diagnostics were among the top seven picks.

Meeting the support requirements of customers is a huge challenge for system builders; only customer retention ranks higher on their list of critical business issues for 2003.

The Need for New Approaches

Phoenix Technologies, a leading provider of technology to system builders, believes the survey findings underscore a critical need for innovations and approaches that address the needs of this channel.

"Smart companies are in tune with system builders and will help them deliver meaningful benefits for users, like reduced costs, increased uptime, and rapid recovery from system failure," said Timothy D. Eades, Senior Vice President and GM, Corporate Marketing and Products Division at Phoenix Technologies and an Advisory Board member of the CMO Council. "This survey tells us that home users and small businesses are a bigger factor than anyone expected. Often, these markets require much more support than large enterprises because they may not have IT departments. If we can help system builders reduce that demand by providing self-help, then everyone wins."

Last month, Phoenix introduced Phoenix cME (Core Managed Environment), a new generation of core system software that addresses critical issues facing the white box manufacturers as well as other system providers. It allows them for the first time to build enabling technologies and applications into a highly secure, protected area of PCs and digital devices, where they're safe from hackers, viruses and other disasters. Phoenix cME thereby enables system providers to differentiate their products, reduce support costs, and improve security at the core.

Serving a Diverse Marketplace

The survey further demonstrates that while many system builders focus on specific vertical industries or niches, the overall channel reaches every segment of the global marketplace, from consumers to the enterprise.

"System builders have become a major channel force of the reseller community," said Robert Danese, Executive Director of NASBA -- The Association of System Builders and Integrators, an influential North American trade organization. "This is a critically important channel that is intimate with customers in the most vibrant customer segments in IT today, offering levels of service and customized hardware and software configurations that are not available or as easily accessible from large PC providers. White box resellers account for upwards of 40 percent of all North American business for many influential vendors in the high tech industry. They continue to increase their market share in the SMB, home, education, and state and local government segments."

Surprisingly, home consumers are a significant sales opportunity for the white box makers, with an estimated 37 percent on average of the system builders' market. In addition, system builders view direct sellers of technology systems as their main competition, suggesting that white boxes are making a real run at mainstream consumer sales, challenging traditional channels along the way.

The segment representing the biggest market for system builders is small business, a market traditionally difficult for large manufacturers to reach and service effectively. Almost half of all system builder sales (45 percent) come from the small business market, according to the study.

The top five vertical markets served by the system builders are retail (45 percent), education (31 percent), healthcare (29 percent), manufacturing (26 percent) and local government (24 percent), suggesting a strong need in the system builder channel to differentiate and custom configure according to vertical business needs.

Complete analysis and survey results summary are available via a comprehensive Thinking Out of the White Box survey report currently available for $1295 at http://www.research.nasba.com.

About Phoenix

Founded in 1979, Phoenix Technologies (Nasdaq:PTEC) helped launch the digital revolution when it created the industry's leading machine-independent BIOS software, which ships in more than 100 million new systems each year. Phoenix continues to leverage that core-level experience to develop many other vital solutions at multiple points in the foundation of PCs and digital devices. Today, Phoenix solutions activate, secure, connect, and recover the world's best-known systems. These solutions operate from a Core Managed Environment (cME), where they're built in and protected from viruses, user errors, hackers, and corruption. Phoenix is headquartered in San Jose, Calif. USA (Silicon Valley), with offices in global business and technology centers. For more information about Phoenix Technologies, visit the Web site at http://www.phoenix.com/.

About NASBA

NASBA -- The Association of System Builders and Integrators, is a professional trade organization, with over 9500 members, serving the white box, integrator and solution provider segments of the computer industry throughout the United States and Canada. NASBA provides its partners and strategic alliances personal relationship development with a variety of niches within the computer industry through direct interaction with NASBA's member community. Through exclusive programs, business services and cost-saving opportunities, NASBA aides members in increasing profitability and growth for their companies. For more information visit the NASBA Web site today at http://www.nasba.com.

About the CMO Council

The CMO Council is dedicated to high-level knowledge exchange, thought leadership and personal relationship building among senior marketing and brand decision-makers. Founding members include executives from companies such as 3Com, AMD, AOL/Time Warner, Applied Materials, Borland, Cisco, Computer Associates, Dell, EDS, EMC, Fujitsu, Hitachi, HP, Hughes Global, Hyperion, Intuit, Iomega, JDA Software, Lucent, Manugistics, Mercury Interactive, Microsoft, NTT-Verio, Novell Inc., Phoenix Technologies, Polycom, Quantum, RSA Security, Siebel Systems, Siemens, Sybase, Symantec, Veritas, Verity, Xerox, Yahoo! and many others. For more information, call 650/328-5555 ext. 272 or visit the CMO Council Web site at http://www.cmocouncil.org.

Note to Editors: Phoenix, Phoenix cME and Phoenix Technologies are registered trademarks of Phoenix Technologies. All other trademarks are the property of their respective owners.