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HP leads server pack

The computing giant grabs the largest share of revenue from server sales in the first quarter of 2003, but finds IBM and Dell nipping at its heels.

Hewlett-Packard led in revenue from worldwide server sales in the first quarter of 2003, but IBM and Dell made the real market gains, according to a report released Friday.

The computing giant garnered the largest share--28 percent--of the $10.5 billion worldwide server market in the quarter with $2.94 billion in sales, the report from IDC said. But that figure marks a decline of 11.7 percent from the first quarter of 2002.

By contrast, IBM saw its server revenue rise by 6.9 percent from a year ago, IDC said. The second-placed company collected $2.68 billion, or nearly 26 percent, of the worldwide market in the first quarter of 2003.

Dell had the biggest leap in first-quarter revenue, showing a rise of 15 percent since last year with sales of $985 million. Its performance was good enough to bring it to fourth place.

Overall, however, worldwide server market revenue in the first quarter showed a year-over-year decrease of 3.6 percent, meeting expectations, according to IDC. One bright spot was a rise of 11.5 percent in unit shipments, boosted by strong sales in the under-$25,000, entry-level server category.

The increase points to a market that's on the road to recovery in terms of unit shipments, but that is also undergoing a shift toward less-expensive models, IDC said. This shift and intense competition has led to drops in both prices and revenue at the other end of the market, among the larger and more-expensive Unix-based servers.

"The continued strength in the volume server space shows that the IT (information technology) marketplace is still adding capacity, but it is doing so with low-cost, rack-optimized servers that fit within today's restricted IT budgets," Vernon Turner, group vice president for Global Enterprise Server Solutions at IDC, said in a statement.

IDC recently forecast that worldwide server sales for all of 2003 will be about the same as the $49 billion racked up in 2002, before beginning a steady growth pattern toward about $58 billion in 2007.

Overall, Sun Microsystems ranked third in worldwide server revenue share, with 12.8 percent of revenue for the first quarter. But its revenue total, $1.35 billion, declined by 15.3 percent on a year-over-year basis, IDC said.

IDC's study showed that servers based on Microsoft's Windows operating system posted a revenue gain of nearly 10 percent, increasing to $3.2 billion during the quarter. Meanwhile, servers based on the Linux operating system showed the greatest percentage rise, up 35 percent year-over-year, to $583 million.

The gains in lower-priced Windows and Linux server categories weren't enough to offset a year-over-year revenue decrease of 12.9 percent in Unix servers, caused by a drop in prices in that category. Unix server revenue was $4.3 billion for the first 2003 quarter, IDC said.

The Unix server woes likely hurt HP and Sun the most, as the companies were separated by only two-tenths of a point for top position in Unix server revenue, IDC said. IBM was the only company to post a year-over-year increase in Unix revenue, adding five points of share during the quarter.

IBM and HP have been battling over servers for some time and were tied for first in Unix revenue during the fourth quarter of 2002.

One thing that's clear is that the battle is likely to continue, said Jean Bozman, IDC analyst, in summarizing the quarter.

"It's hard to predict exactly, but the point is, they are both large enough that they can battle it out, and I think that's what they're doing here," Bozman said.