IBM increases lead in server market

IBM further expanded its lead over Sun Microsystems and other rivals in the server market, although the overall market continued to shrink in the third quarter, according to a new report from researcher Gartner Dataquest.

Big Blue took more than 30 percent of revenue generated by the server market in the third quarter of 2001, a 7 percent increase over its market position in the same period a year ago, according to Dataquest. In the previous quarter, IBM picked up about 4.5 percent more of the market in terms of revenue.

By contrast, nearly all other major manufacturers saw their portion of the market remain flat or decline and saw total revenue shrink. Sun, No. 3 in the overall server market and first in servers based on the Unix operating system and RISC processors, saw its total share of the market drop from 17.3 percent a year ago to 13.7 percent. Compaq, No. 1 in Intel-based servers and No. 2 overall, dropped from a 15.7 percent portion of the server revenues to 13.8 percent.

Dell, meanwhile, saw its market dip slightly, from 6.5 percent to 6.4 percent, although it remained the only major company to see gains in the Intel-based server market. Hewlett-Packard saw its market position go from 13 percent to 13.1 percent, according to Dataquest.

Overall server revenue was down 23.4 percent year over year, declining from $14.1 billion in the third quarter of 2000 to $10.8 billion last quarter. The market saw a sequential decline as well, down by roughly $750 million from the previous quarter.

Still, IBM is stemming its losses better than most. The company saw server revenue slide from $3.3 billion in the third quarter last year to $3.28 billion, a decline of less than 1 percent. Close competitors, by contrast, saw revenue drop by 23 percent to nearly 40 percent.

Gartner analyst George Weiss says it is not surprising that IBM is increasing its lead in the server market. The company has been reinventing its server business, and the results are quite positive. see commentary

Sun's server revenue, for example, plunged from $2.4 billion to $1.5 billion, a 39.2 percent decline, while HP declined from $1.8 billion to $1.4 billion, a 23.2 percent drop.

IBM, in fact, was the only major company to gain revenue from the second to third quarter. As a whole, the industry saw revenue decline sequentially by 6.5 percent.

Part of the IBM's success is owed to doing well in several markets. It ranks third in both RISC- and Intel-based servers in terms of revenue, but combined it lands in first place.

"Customers are deploying both Unix and Intel servers in the enterprise," said Jim Gargan, vice president of IBM's XSeries server line. IBM's XSeries initiative, in which the company migrates mainframe technologies to Intel-based servers, is also catching on with customers, he added.

The Unix/RISC server market and the Intel-based server market appear to have suffered about equally. Revenue generated by the Unix/RISC market declined 27.3 percent in the third quarter, to $4.6 billion. Intel-based server revenue declined 28.6 percent, to $4 billion. Still, the gap between the two segments is closing. Sequentially, Unix/RISC revenues dropped by 15.5 percent, while Intel server revenue dropped only 3.1 percent.

In the Unix/RISC market, Sun remained No. 1, accounting for 32.6 percent of revenue, followed by HP and IBM, which respectively commanded 23.6 and 19.6 percent of revenue.

In the Intel market, Compaq held onto the top spot with 26.3 percent of the market by revenue, but Dell, IBM and HP all moved closer. Dell, at No. 2, experienced a revenue decline of 25 percent to $692 million but saw its market portion rise 0.8 percent to 17 percent. HP and IBM, No. 3 and No. 4, saw revenue decline by over 30 percent and a slight dip in market segment.