New Unix, Linux Challengers
At the high end of the Unix market, a few players such as IBM, Hewlett-Packard and Sun are competing for an increasingly shrinking market, although it remains a market with high margins and good profits. In its most recent report of the server market, IDC found that Unix revenue grew at only 1.5 percent in the fourth quarter of 2007 for a total of $5.2 billion. With the market essentially flat, Joe Clabby, president of Clabby Analytics, said he believes that IBM has been able to grow by taking market share away from Sun's SPARC systems as well as HP's servers based on Itanium processors from Intel. One reason could be IBM's Migration Factory program, which offers aggressive pricing and services to encourage switching from HP or Sun systems to IBM systems based on Power Architecture.Then there's Linux. For years, Unix systems supported the robust applications needed in financial services or government data centers, and it was an area in which Sun did especially well with its Solaris operating system and servers based on SPARC. Now, many application developers are recompiling their software to run on Linux, which gives customers the option of running applications on x86 hardware as well as on IBM Power systems, which offer Unix and Linux support. "A lot of businesses look at these rows of Sun systems and ask themselves if they really need new SPARC boxes or do I go to x86-based servers for a fraction of the cost but with the performance I need," said Charles King, principal analyst at Pund-IT Research. "The problem is that Sun came to x86 later in the game and the traditional Unix guys like IBM and HP are gunning for them in the high end." Sun has had some success with its new line of UltraSPARC T1 and T2 processors, code-named Niagara, but the delay of its new "Rock" processor and the fact that the company has not updated its older chips, such as the UltraSPARC IV+, to compete with IBM's Power 6 chip have also hurt the company, King said. In his analysis, TBR's Farina calculated that about a third of Sun's revenues come from the SPARC line. Farina also said he believes that Sun, unlike IBM and HP, has not done a good job of selling its high-end hardware to customers and the company cannot afford to lose a significant chuck of revenue from the high end. "I think HP and IBM are better positioned to win on price than Sun is, in part because of their much larger revenue base, but also due to their more efficient operations," Farina wrote. "They can afford to take lower margin on hardware deals in order to win business; then they likely make up the margin on software and services offerings."
"IBM is gaining Unix market share in a flat Unix market," Clabby wrote in an e-mail. "This means that they are taking it from someone and there's only HP and Sun to take it from."