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IBM Bumps Hewlett-Packard from Top Spot in Computer Server Market

Posted on: Thursday, 11 September 2003, 06:00 CDT

Sep. 11--IBM is back on top of the world's computer server market, a position analysts said could help drive more customers to its machines as competition intensifies.

In the second quarter, IBM had a 30.4 percent share of the market, based on revenue, for the powerful computers used to run corporate networks, according to IDC, an industry research firm that tracks the market quarterly. It was enough to bump Hewlett-Packard, which had a 27.7 percent share, from the No. 1 spot.

Analysts said the top ranking could give a boost to IBM, though it might seem an insignificant shift on yet another list. The market for servers has become more competitive since Hewlett-Packard's 2002 purchase of Compaq and the steady rise of Dell.

"It's almost like a self-fulfilling prophecy," said Kim Caughey, and analyst with Parker/Hunter in Pittsburgh. "If you're a customer who doesn't know who to buy from, perhaps knowing that IBM right now is ranked at the top will sway your decision."

More than 1,000 workers in the Triangle, where IBM employs 13,500, are involved in the computer server business. They develop and design the xSeries line, which is based on Intel chips.

"We measure ourselves and our strategy and the success of it based on customer response," said Jeff Benck, vice president of IBM's eServer Blade systems in Research Triangle Park.

"They're responding with their dollars. That's clearly an indicator of how we're doing."

For the second quarter, revenue in IBM's Systems Group, which includes its server business and storage systems, rose 10 percent to $3.2 billion, compared with $2.9 billion in the same period a year ago.

Adjusted for constant currency, the increase was 3 percent.

Last month, IBM said Lego , the toy maker, selected it as the vendor for new servers. IBM replaced 220 Hewlett-Packard machines with 34 from its server line.

"IBM shows incredible strength in the server industry," said Jean S. Bozman, analyst with IDC.

"But looking forward, there will continue to be this increasing competition between IBM and HP."

IBM has had a tough fight against Hewlett-Packard since the company merged with Compaq.

In the second quarter of 2002, IDC declared a statistical tie between the two companies.

IBM edged out Hewlett-Packard again until the first quarter of this year.

And even though IBM won in the second quarter, Hewlett-Packard, the world's second-biggest computer company, retained its lead in the Linux and Windows server markets.

Analysts expect the market to continue to tighten and prices to fall as the companies fight .

It's a segment that will remain important to IBM, even as it makes a transition into a services company, overseeing computer needs of large and small businesses, said Caughey of Parker/Hunter.

"They have to have the total package," she said.

"That's what people want from IBM: one-stop shopping."

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(c) 2003, The News & Observer, Raleigh, N.C. Distributed by Knight Ridder/Tribune Business News.

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