IDC Server Tracker Finds Server Market Still Slinking Along

By Amy Newman (Send Email)
Posted Jun 2, 2003


IDC's latest Worldwide Quarterly Server Tracker revealed a still sluggish server market in which factory revenue decreased 3.6 percent to $10.5 billion during the first quarter of 2003, compared with the same quarter a year ago.

IDC's latest stats reveal a still sluggish server market in which factory revenue decreased 3.6 percent during the first quarter of 2003. The research firm believes this slight, albeit continual, dip is indicative of a continued trend toward stabilization in overall market spending for which it credits the volume server segment.

IDC notes that this sequential quarterly decline is less than the 5 percent year-over-year decline experienced in 4Q02, and it is in line with its expectations for 1Q03 factory revenue.

The research firm believes that this slight, albeit continual, dip is indicative of a continued trend toward stabilization in overall market spending.

According to IDC, the volume server segment (i.e., servers priced less than $25,000) grew nearly 10 percent year-over-year, in terms of factory revenue, and kept the market afloat. Meanwhile, overall server market unit shipments grew 11.5 percent year-over-year.

IDC believes this surge in volume server sales reflects a growing trend of IS organizations buying low-cost servers to add incremental capacity to the existing computing infrastructure.

"The continued strength in the volume server space shows that the IT marketplace is still adding capacity, but it is doing so with low-cost, rack-optimized servers that fit within today's restricted IT budgets," said Vernon Turner, group vice president of Global Enterprise Server Solutions at IDC.

"Worldwide server sales in the first quarter were in step with traditional seasonality, following a stronger fourth quarter. But they also reflect new buying patterns for server systems that have emerged during the economic downturn of 2001-2002," Turner added.

Where the Vendors Rank

Once again, at first blush, HP appears to come out on top, with the stats placing the vendor in the No. 1 spot in all the key categories -- worldwide revenue and market share, as well as Intel, Unix, and Linux revenue and market share. However, a more careful review of these numbers shows a year-to-year revenue decline in all categories except for Linux servers, and a quarter-to-quarter revenue decline across the board. In addition, HP saw a year-to-year market share decline in all categories.

IBM, however, also again experienced a year-to-year increase in revenue and market share, and Dell, while ranked third in each category (except for Unix, where Sun, IBM, and HP took the top spots), saw consistent double-digit growth.

Top 5 Vendors, Worldwide Server Systems Factory Revenue, First Quarter 2003
(Revenues Millions)
Company 1Q02 1Q03 Revenue Growth
(%)
Shipments Market Share
(%)
Revenue Market Share
(%)
HP $3,325 30.4% $2,937 27.9% -11.7%
IBM $2,511 23.0% $2,684 25.5% 6.9%
Sun $1,589 14.5% $1,346 12.8% -15.3%
Dell $856 7.8% $985 9.3% 15.1%
Fujitsu $573 5.2% $560 5.3% -2.2%
Others $2,075 19.0% $2,028 19.2% -2.3%
All Vendors $10,929 100 $10,541 100 -3.6
Note: Data for Hewlett-Packard includes revenue for both Hewlett-Packard and Compaq.
Source: IDC (May 2003)

In the Unix server market, fierce competition ensued once again for the No. 1 spot. HP and Sun virtually tied for the position in 1Q03, separated by 0.2 point of market share. IBM rounded the top three vendors, gaining 5 points of market share year-over-year.

Overall, the Unix market declined 12.9 percent to $4.3 billion from 1Q03. IDC attributes this to a decline in average sales prices, especially for midrange and high-end enterprise Unix server systems.

"The intense price competition between the top three Unix server vendors continues to make the No. 1 position in the Unix server market -- including Unix servers based on RISC and on x86 architectures -- difficult to predict," said Jean S. Bozman, research vice president of Global Enterprise Server Solutions at IDC. "This quarter, HP appears to have leveraged its merger with Compaq to pull even with Sun for leadership of the worldwide Unix server market. However, IDC expects that the leading vendors will continue to compete for market leadership in coming quarters."

The rapidly growing Linux server market increased 35 percent to $583 million from the year-ago quarter. "Unit growth and factory revenue in the Linux market continue to climb, driven by increasing functionality for Linux server hardware and software and by intense competition between all the major server vendors," said Bozman. "While HP continues to lead the Linux market, Dell and IBM are working hard to post market share gains in the Linux server market."

Finally, IDC noted that the Windows server market grew nearly 10 percent in 1Q03 in terms of factory revenue, compared to 1Q02. Windows servers accounted for $3.2 billion of the total sever systems market revenue during 1Q03.

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