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Worldwide Server Market Posts Fourth Consecutive Quarter Growth

Posted on: Friday, 28 May 2004, 06:00 CDT

According to IDC's Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market grew at 7.3% year-over-year to $11.5 billion in the first quarter of 2004, marking the fourth consecutive quarter of positive overall growth. It was also the second consecutive quarter in which all major categories of the worldwide server market grew when compared to the same period in the previous year.

The breadth of growth shows that demand for server systems is on the rise, although seasonal variations caused first-quarter revenues to be less than fourth-quarter revenues. "IT spending is clearly trending upward and IT organizations are beginning to rebuild their computing infrastructure," said Vernon Turner, group vice president of Global Enterprise Server Solutions at IDC. "Following nearly three years of slowed spending during the economic downturn, we see that server systems are a priority in these rebuilding efforts."

Top Server Market Findings

-- Strong year-over-year unit shipment growth of 22.4%.

-- Dell and Sun Microsystems were in a statistical tie for the number 3 spot in the rankings of server vendors, based on worldwide factory revenue results that differed by less than 1%.

-- Linux server sales grew revenues at 56.9% and unit shipments at 46.4%, the seventh consecutive quarter of double-growth revenue growth.

-- Windows servers posted double-digit growth, as revenues grew 16.4% and unit shipments grew 26.5% in year-over-year comparison.

-- Building on fourth quarter gains, IBM's mainframe servers showed market strength in the first quarter of 2004, with 33.7% revenue growth and 41.8% unit growth, compared with the first quarter of 2003.

-- Unix server revenue declined slightly, dipping 3% worldwide year-over-year; but Unix server revenues showed growth in Japan and Asia/Pacific, where Unix-based IT infrastructure and telecommunications are expanding.

Overall Server Market Standings, by Vendor

-- IBM held on to its number 1 spot in the worldwide server systems market with 29.7% market share in factory revenue - while growing factory revenue by 20.5% compared to 1Q03.

-- In terms of unit shipments, HP was the number 1 vendor worldwide. In terms of factory revenue, HP took the number 2 spot with 26.9% share, growing revenue 3.8% compared to 1Q03.

-- After growing server market revenue every quarter since 2001, Dell pulled even with Sun. Because factory revenue results differed by less than 1%, Sun and Dell were in a statistical tie for third place in 1Q04. Sun has held the number 3 spot in the worldwide server market since HP merged with Compaq in May, 2002.

x86 Industry Standard Server Market Dynamics

The x86 server market dynamics continued to be strong in 1Q04. Factory revenue grew 14.1% to $5.1 billion worldwide, while unit shipments grew 23.5% to more than 1.3 million servers worldwide. "The strong growth of x86 servers can be linked to their use across a wide range of computing workloads, combined with a very strong software and hardware replacement cycle," said Mark Melenovsky, research director of IDC's Global Enterprise Server Solutions. "New x86-64 servers, which support both 32-bit-and 64-bit applications, showed 35.1% sequential growth in unit shipments. Although this category accounted for less than 2% of the total x86 market in Q104, this space is expected to expand rapidly by 2005, given Tier 1 OEM support for AMD's Opteron processor, Intel's February announcement of 64-bit extensions, and x86-64 platform support for 64-bit Windows and 64-bit Linux for both technical and commercial applications."

Linux Servers Near the $1 Billion Mark in Quarterly Revenue

This is the second consecutive quarter in which Linux servers have posted more than $900 million in worldwide factory revenue, nearing the $1 billion mark. Compared with 1Q03, Linux servers showed 56.9% growth, while unit shipments grew 46.4%. IDC notes that Linux server revenue and unit shipments have grown at double-digit rates since the second half of 2002. "Despite past concerns about Linux scalability and its suitability for enterprise applications, the data shows that the market continues to invest strongly in Linux servers," said Jean S. Bozman, research vice president, Global Enterprise Server Solutions. "Linux servers are playing increasingly important roles in IT customers' computing infrastructure. They are taking on enterprise workloads, now that more ISV applications are available for both technical and commercial workloads on the Linux server platform."

Windows Market Shows Strong Growth; Unix Market Declines

The Windows server market showed strong growth, with factory revenues increasing by 16.4% year-over-year and unit shipments gaining 26.5%. Overall, Windows servers accounted for $3.8 billion in the first quarter, representing 32.7% quarterly server market revenue. In contrast, the Unix server market declined 3% in revenue, year-over-year, on a worldwide basis to $4.1 billion. Even as Unix revenue declined in the U.S. and in Western Europe, Unix server sales grew in Asia/Pacific, Japan, and in other geographies, reflecting growth in Unix-based IT infrastructure related to telecommunications, government and business. HP gained the number 1 spot in the Unix server market, with 31.1% market share in terms of revenue, while Sun was second with 28%. IBM followed with 25.2% revenue share.

Summary

The worldwide server market continues to show signs of a strong recovery, with four consecutive quarters of growth in factory revenue. The business climate has changed dramatically since the economic downturn - when vendors pushed technology - to an economic recovery when customer demand is surging. The server-market landscape is undergoing major change as the influence of new technologies, including Linux, clustering, and server blades, is forging new deployments of IT infrastructure. -0- *T Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, First Quarter of 2004 (Revenues are in Millions) Revenue Q1 2004 Market Q1 2003 Market Growth Vendor Revenue Share Revenue Share 2004/2003 ---------------------------------------------------------------------- IBM $3,413 29.7% $2,831 26.4% 20.5% Hewlett-Packard $3,101 26.9% $2,988 27.9% 3.8% Sun Microsystems $1,174 10.2% $1,341 12.5% -12.5% Dell $1,128 9.8% $994 9.3% 13.5% Fujitsu/Fujitsu Siemens $925 8.0% $892 8.3% 3.7% Others $1,768 15.4% $1,679 15.7% 5.3% All Vendors $11,508 100.0% $10,725 100.0% 7.3% IDC's Worldwide Quarterly Server Tracker, May 2004 *T

IDC's Server Taxonomy

IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers (servers priced less than $25,000), midrange enterprise servers ($25,000 to $499,999), and high-end enterprise servers ($500,000 or more). The revenue data presented in this release is stated as factory revenue for a server system. IDC presents data in factory revenue to determine market-share position. Factory revenue represents those dollars recognized by multi-user system and server vendors for ISS and upgrade units sold through direct and indirect channels and includes the following embedded server components: Frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments.

IDC's Worldwide Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and factory), segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture. For more information, please contact Hoang Nguyen at 508-935-4718 or hnguyen@idc.com.

To purchase this document, call IDC's sales hotline at 508-988-7988 or email sales@idc.com.

About IDC

IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. We analyze and predict technology trends so that our clients can make strategic, fact-based decisions on IT purchases and business strategy. Over 700 IDC analysts in 50 countries provide local expertise and insights on technology markets. Business executives and IT managers have relied for 40 years on our advice to make decisions that contribute to the success of their organizations.

IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. Additional information can be found at www.idc.com

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