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Home Servers Serve Up A Home Run

The expectation that consumers would be slow to adopt home servers may have been premature, as Hewlett-Packard sold through its initial allotment of the devices in less then a month.

This comes after almost a year of build-up for the product that culminated in Hewlett-Packard shipping the first two servers in December.

The devices, based on Microsoft’s Home Server operating system, were introduced by company founder Bill Gates during his International CES 2007 keynote address, about 12 months before the first unit was ready to be shipped. For the majority of the year Microsoft and HP maintained a steady, if low-level, publicity campaign to keep the server idea somewhat fresh in the public’s mind. This was primarily accomplished via a series of press events held over the course of the year.

Interestingly, Microsoft and HP downplayed the server’s potential popularity, stating continuously from last January that having a server in a home will be an acquired taste for consumers.

This prediction was somewhat offset by news from HP in early December that it had sold through the initial allotment of its 500GB and 1TB MediaSmart servers. The products became available for preorder in November with the 1TB, priced at $799, outselling the $599 500GB version, said HP’s Carlos Montalvo product and marketing manager VP, managed home.

HP’s two initial models each has four hard drive bays with the 500GB model coming with a single-500GB drive pre-installed, leaving three empty drives, while the 1TB model will have two pre-installed 500GB drives. The server’s total capacity is 6TB when all the bays are filled with 750GB drives and four external 750GB hard drives are connected via the four USB 2.0 ports. It is powered by an AMD 1.8Ghz processor.

HP did not say how many units it went through during this period, but the company is trying to refill its inventory levels by flying in new units from China.

“For those who live the digital life, it’s, ‘What took so long?’ Others are surprised by having a server in the home,” said Montalvo.

Even though the MediaSmart server has just become available, HP will refresh the line in February or March, Montalvo said. This will include better virus protection, support for the 64-bit Vista operating system and better streaming capability.

While HP was Microsoft’s initial launch partner, Gateway and Iomega are expected to roll out servers during the first quarter.

Iomega has high hopes for this new category.

“We see this as an extension of our current product lines, and not really a new category for us,” said Tom Kampfer, Iomegas’s president and COO.

Iomega’s version is called the HomeCenter Server. It will come with a single 500GB drive with three empty bays so the consumer can expand capacity as needed. Pricing has not been set, but Kampfer said the company wants to hit a low initial price point to help attract customers.

Iomega is still working with retailers on where to merchandise the HomeCenter.

“It has to be on the floor in a display, but figuring out how to demo it is a challenge,” he admitted. “We have to work hard to convey all the fun stuff that can be done with the server and not just the back-up applications.”

All of the companies rolling out home servers are hyping the fact that the devices allow owners to create and host their own password-protected Web sites, making it easier to share and display photos and videos. The large amount of storage capacity creates a place to store downloaded content, and, Kampfer said, eventually the HomeCenter Server and its competitors will make fine media servers.

The initial models do not come with software capable of handling DRM, but this will be corrected with the follow-up versions expected to be released in 2008, said Montalvo.