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Exchange, Notes vie for email lead

Microsoft's messaging server is chipping away at the corporate email market that Lotus has led for years, but both face threats from outside players.

Microsoft's Exchange messaging server is chipping away at the huge chunk of the corporate email market that Lotus has enjoyed for years, but threats from outside players may leave them both in the lurch.

According to a recent study being touted by Microsoft, Exchange took the lead over Lotus Notes in enterprise sales in the second quarter of this year.

Preliminary results from a survey, due out in September, done by the industry newsletter Electronic Mail & Messaging Systems (EMMS) found that for the second quarter in a row Exchange outsold Notes in corporate sales. The newsletter reports that 3.6 million Exchange server client licenses were sold worldwide during the first quarter of 1998, compared to the 3.1 million Lotus Notes client licenses sold.

That's the second quarter in a row that Exchange has outsold Notes, analysts said. In the first quarter, Microsoft sold 3 million copies of Exchange, versus 2.7 million copies of Notes.

A second study released this week, and commissioned by Microsoft, not surprisingly found that more than half, or 52 percent, of the Fortune 50 use Exchange as their email systems. The study was conducted by international research firm the Radicati Group.

Analysts note that Lotus still has a commanding lead in the installed base. According to estimates, Notes has 25.1 million inviduals actually using the software, compared to 16.6 million for Exchange.

Lotus executives would not comment on the study results. A company representative said the second quarter was its second-highest in terms of Notes sales.

Industry observers said the findings are consistent with their analysis but said that on the whole Microsoft Exchange has a long way to go in order to seize the messaging market from Lotus.

"The problem is Notes [isn't a bad product]," said Eric Brown, an analyst with Forester Research. "[Microsoft] hasn't taken away Lotus's hold on the market yet."

Brown said he wouldn't be surprised if someday soon Exchange catches up to Notes in market share. "They may be at dead heat at some time."

"But there won't be a day when Microsoft enjoys 80 percent of the market. It just won't happen," Brown said.

Holding Lotus and Microsoft at bay will be new competitors in the messaging market. Brown said that the big challenge is going to come from Netscape Communications and Sun Microsystems, which are both concentrating on providing email services through Internet service providers. "It's a whole other thing to scale millions of users."

Exchange is popular with companies that want to install an email and groupware system that is consistent with the rest of the corporate infrastructure--namely with Windows NT and the rest of Microsoft's BackOffice family of server software, Brown said. Notes, on the other hand, meets the needs of those customers who have a variety of systems and operating systems within their infrastructure, such as mainframe and AS/400 systems.

Dave Malcolm, group product manager for Exchange, touted the numbers as an example of how the "landscape" has changed in the messaging market. "Email has become as mission critical within organizations as the phone. That change has made the requirement for scaleable message applications."