Server vendors got a dose of good news-bad news in the third quarter of
1998, according to a new report.
The good news is that the worldwide market for servers grew at a healthy
pace in the third quarter of 1998, according to International Data Corporation.
The bad news: While server shipments grew 15 percent on a yearly basis,
worldwide revenues declined 3 percent, primarily due to horrid conditions in the Japanese market
and pricing pressure at the low end of the market, the report said.
On the other hand, "Vendors with well-tuned strategies for exploiting
emerging server market trends [such as] Dell and Sun
Microsystems continue to deliver positive results," said Jim
Williamson, a senior research analyst with IDC.
Among the report's findings:
The Japanese market is still in a funk, with server revenues sliding by 38
percent from one year ago.
Problems in Japan were offset by strong revenue growth in the U.S. and
European server market.
The Asia-Pacific region, which excludes Japan, pulled out of its nosedive
to show an increase in total server revenues by 15 percent from the same
period last year.
Sun, Dell continue winning ways
In the U.S., the market gained 8 percent in terms of revenues, fueled by
sustained economic growth and corporate investment in information
technology, while Western Europe also had a strong showing, with revenues
growing 23 percent on a yearly basis.
Sun and Dell capitalized best on prevailing market conditions. Sun, the
No. 4 vendor in terms of revenue, grew server sales 39 percent from
1997, although it slipped behind Compaq Computer
in ranking from the second quarter.
Sun is doing well, Williamson said, because "they are continuing to push
Unix at a time when people are realizing Windows NT can't do everything
that's been promised." They also have new models that are selling well, and
those priced under $50,000 are selling in "high volumes." Dell grew because
of a continued focus on corporate customers, he noted.
On the other hand, even a growing server market couldn't do much to help
Compaq. The company continues to suffer from a number of problems in its
server business, including lingering after-effects related to an excess of inventory early in the
PC server revenues declined from $983 million in the third quarter of 1997
to $955 in 1998 during a robust market, said Williamson. Some of the
decline is due to management's preoccupation with absorbing Digital, he
"It has taken Compaq a while to absorb Digital. It almost tripled their
employees, and I'm not sure they were prepared for that," he said.
Still, the company managed to reach the No. 3 spot in server revenues behind IBM and Hewlett-Packard, based on revenues from sales
of Digital Equipment's servers.
Meanwhile, Japanese server vendors such as NEC, Fujitsu, and Hitachi posted double digit declines in
server revenues on a yearly basis.