Growth in server sales suggests shifting market

Strategic sales of more expensive servers indicates the "Band-Aid approach" of recent years is waning, analyst says.

Corporate customers paid a higher average unit price for servers in the fourth quarter, signaling a more strategic approach to their infrastructure investments, according to an IDC report released Friday.

Worldwide server sales grew to $14.4 billion in the fourth quarter, up 5.1 percent from year-ago figures, while unit shipments posted a more modest growth rate.

"What we saw in the quarter was a different mix of products going out in the market. They were more richly configured systems," said Matt Eastwood, IDC's vice president of enterprise server research. "That's a good sign that enterprises are investing strategically in their infrastructure and not taking a Band-Aid approach."

During the quarter, 1.8 million servers were shipped worldwide, a 15.7 percent increase over the previous year. But in the fourth quarter of 2003, the year-over-year growth rate had been about 23 percent, Eastwood noted.

The figures suggest companies have shifted away from the "bare minimum" approach to buying servers that had been prevalent, Eastwood added.

Linux servers generated a lot of interest among buyers, posting the fastest revenue and shipment gains, compared with competitors based on Unix and Windows. During the quarter, Linux server revenues rose 35.6 percent to $1.3 billion and accounted for nearly one-tenth of all server sales worldwide. Linux server shipments grew 29.1 percent, to 326,000 units, over year-before figures.

"These figures also show a more mission-critical mix is working its way into the Linux ecosystem," Eastwood said.

Unix machine sales grew a modest 2.7 percent, to $5.2 billion in the fourth quarter, over the previous year. And Windows server sales rose 15.5 percent to $4.6 billion in the fourth quarter, compared with year-ago figures.

The scorecard
IBM maintained its top rank for server sales. It generated a 6.5 percent revenue increase to $5.5 billion in the fourth quarter, with its market share growing to 38.2 percent from 37.7 percent a year ago, according to the report.

Hewlett-Packard maintained its No. 2 ranking with 25.9 percent of the market. Sun Microsystems held onto its shrinking third place rank of 9.4 percent, with Dell closing in, claiming 9 percent of the market.

But on the server-shipment front, HP maintained its No. 1 position with 31 percent of the market, followed by Dell with 21 percent and IBM with 19 percent. All three vendors increased their shares of the market in the quarter, with Sun and other vendors losing ground.

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