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Linux server sales show high-end trend

Fourth-quarter sales stats show customers were happy to buy pricey, powerful Linux servers, with those machines winning jobs in high-performance computing and commercial workloads.

Customers gravitated toward more-expensive and powerful Linux servers in the fourth quarter of 2003, new sales statistics show.

With the server market's heavy pricing pressure, revenue growth has typically been far less than unit shipment growth--when any revenue growth could be found in the last three difficult years. But in Linux servers, revenue growth outpaced unit shipments, according to fourth-quarter figures from market research firm IDC.

Linux server revenue grew 63 percent to $960 million from the fourth quarter of 2002 to the fourth quarter of 2003, IDC said. At the same time, unit shipments grew 53 percent to about 250,000.

"It implies that there are more powerful systems in the mix," IDC analyst Jean Bozman said.


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Linux servers caught on for Web site infrastructure and basic network tasks, but now they're "branching out to include high-performance computing and commercial workloads," she said.

The top Linux seller was Hewlett-Packard, with 27.5 percent of the market. No. 2 IBM had 21.1 percent, and No. 3 Dell had 18.2 percent, Bozman said. While those companies account for the majority of sales globally, many small companies have niches, particularly in regions that rely on very localized versions of Linux.

Microsoft identified Linux as a top threat, and indeed Linux servers outgrew Windows servers. But Windows still has a healthy lead, with growth of 16 percent leading to overall sales of $3.9 billion, IDC said. That was roughly four times the Linux market for the quarter.

Gartner, IDC's major rival, reported its 2003 server sales figures Wednesday. While the two research firms disagreed on some shades of the market, they agreed that rosier times have returned.

Gartner and IDC weren't far off for the overall quarter, with IDC saying sales grew 11.4 percent to $13.7 billion and Gartner saying sales increased 12 percent to $13.4 billion.

"Revenue growth was shown in all major categories," low-end systems costing less than $25,000, midrange ones between $25,000 and $500,000, and high-end machines of $500,000 and up, Bozman said.

"This is the first time it's happened in all those categories since the economic downturn in 2001," Bozman said. "It looks like information technology spending has freed up to some extent."

IDC has predicted a 6 percent to 8 percent increase in overall IT spending in 2004.

IDC cautioned that exchange rates affected its statistics. Measuring in local currencies, the overall market grew 3 percent, Bozman said.

IDC, like Gartner, placed IBM as the top server seller, followed by HP, Sun Microsystems and Dell. Fifth-place Fujitsu grew faster than those above it, though, at 31 percent to $734 million, IDC said.

Another change in the market was the return to growth for Unix, which expanded 0.8 percent to $5.1 billion, IDC said. The turnaround came after 11 straight quarters of shrinkage.

In the fourth quarter--IBM's last in its fiscal year and often one with strong sales--Big Blue was top in Unix, with 33 percent of revenue. No 2 HP had 31 percent, and No. 3 Sun had 28 percent.

After years of shrinking revenue, Sun is expanding into servers using Intel and Advanced Micro Devices processors and the Linux operating system. It's also emphasizing unit shipments, at the expense of revenue.

In the last six months of 2003, Sun sold the most servers of its history, CFO Steve McGowan said at Sun's annual analyst conference earlier in February. Selling large numbers of systems is "important for future revenue, footprint control (keeping customers), and probably most important for ISV (independent software vendor) design capture," he said.