Server Sales Decline&#151Again

An IDC study finds that worldwide server sales fell for the sixth straight quarter, as HP tied IBM for the top spot.

Worldwide server sales fell for the sixth straight quarter, declining 16 percent from a year ago to $10.5 billion in the second quarter, according to study released today by International Data Corp.

Hewlett-Packard Co., thanks to its acquisition of Compaq Computer Corp., tied IBM as the leader in market share, each with 27.8 percent, marking the first time Big Blues hold on the top spot has been seriously challenged. However, HP saw its worldwide market share slip 2 percent compared with the combined server revenues of HP and Compaq last year.

Sun Microsystems Inc. came in third in worldwide revenue with 16.6 percent market share, followed by Dell Computer Corp. with 8.4 percent and Fujitsu Ltd. with 3 percent.

Dell was the only computer maker among the top five to post an increase in sales as its revenues grew 4.6 percent to $884 million. Compared with the second quarter of last year, IBMs server sales fell 16.2 percent to $2.9 billion; HPs declined 18.1 percent (compared with combined HP, Compaq) to $2.9 billion; Sun dipped 12.3 percent to $1.8 billion; and Fujitsu dropped 29.8 percent to $321 million.

"The overall server market continued its ongoing broad-based decline, which has affected almost all major product categories and all geographies," said Mark Melenovsky, director of server and infrastructure hardware programs for IDC, based in Framingham, Mass. "While demand in the second quarter remained soft, we expect the worldwide server market to approach near flat year-on-year growth for the remaining two quarters of the year."

In comparing the results to those for the first quarter of this year, IBM, Sun and Dell were the only top-tier server vendors that grew server revenues faster than the overall market, with sequential growth rates of 17 percent, 11 percent and 4 percent, respectively. Overall, worldwide server sales declined 3 percent from the previous quarter.

IBM showed strong growth in its Linux business, growing more than 36 percent year over year, with respect to revenue, more than tripling the market growth of 11 percent. The report attributed IBMs strong performance to successful marketing efforts promoting the companys xSeries and Linux server lines, as well as high demand for its Linux cluster systems in the United States.

Sun maintained its No. 1 position in the Unix server market with 39 percent market share, followed by HP at 31 percent and IBM at 20 percent.

"Despite the market decline rate of 20 percent year to year in the Unix server market, the top three vendors continue to make strong strides in consolidating their shares of the total available market," said Hoang Nguyen, manager of IDCs worldwide quarterly server tracker program. "Their combined revenues represent nearly 90 percent of the overall Unix market, making it very difficult for smaller vendors to compete in this space."

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