HP Still Leads in Server Sales

Despite a nearly 5 percent drop in sales, HP remains world's largest server vendor, but rival Dell is closing the gap.

Despite a nearly 5 percent drop in sales over the past year, Hewlett-Packard Co. remained the worlds largest server vendor, based on units shipped, but rival Dell Computer Corp. continued to close the gap, posting an 18 percent increase in sales, according to a study released Monday by Gartner Dataquest.

Overall, U.S. server sales rose a robust 12 percent—and worldwide unit shipments grew 3 percent—compared to the same period a year ago, posting their strongest increases since the industry fell into a recession in early 2001. While this is the third time U.S. sales have shown year-over-year increases, an analyst warned that the outlook for the server market, which was hard hit by a U.S. recession in 2001, remains uncertain.

"The server market still looks cloudy, with the possibility of war in the Middle East further aggravating economic uncertainty, and continued constraints on IT spending which make it hard to be optimistic about real recovery of the worldwide server market this year," said Shahin Naftchi, an analyst for Gartner Dataquest, in San Jose, Calif.

HP, which became the worlds largest server vendor in May after it acquired Compaq Computer Corp. for $18.5 billion, accounted for slightly more than 30 percent of all units shipped last quarter, well ahead of the 19.2 percent share held by number two vendor Dell, of Round Rock, Texas. But HP, of Palo Alto, Calif., saw its worldwide sales decline 4.8 percent compared to the combined HP and Compaq a year ago, underscoring its difficulty in retaining customers.

"The dust has not settled yet for HP," said Gartner analyst Jeffrey Hewitt.

By contrast, Dell continued to gain share in both worldwide and U.S. markets, where it posted a 26. 7 percent increase in sales, making it the leader with a 26.3 percent share, slightly ahead of HP with a 25.9 percent U.S. share.

Worldwide server sales totaled slightly more than 1.1 million units. After HP and Dell, the worlds largest vendors were IBM, Sun Microsystems Inc. and NEC Corp.