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Sun moves up on IBM in server sales

The server market increases 12 percent in the third quarter, to $15.4 billion, with Sun Microsystems advancing over two competitors to take second place overall, a study says.

Stephen Shankland principal writer
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Stephen Shankland
3 min read
The server market increased 12 percent in the third quarter, to $15.4 billion, with Sun Microsystems advancing over two competitors to take second place overall, a study released Wednesday said.

IBM's $3.2 billion in server revenue for the third quarter of 2000 kept it at the top of the list, but Big Blue actually lost 2 percent of the share it had in the third quarter of 1999, said market research firm IDC.

Sun jumped from fourth place in the third quarter of 1999 to second place in the third quarter of 2000. Sun, with $2.8 billion in server revenue and a growth rate of 63 percent, passed Compaq Computer, which had $2.7 billion in server revenue, and Hewlett-Packard, which had $2.3 billion. Dell Computer was in fifth place with $898 million in revenue.

The server segment is an increasingly important revenue source for computer makers trying to benefit from the rise of the Internet and find a haven from faltering desktop computer shipments. Though Sun has benefited from its focus on servers, analysts recently have voiced some concerns about the company's ability to maintain its growth pace.

Sun specializes in Unix servers, comparatively powerful machines whose market grew 20 percent--faster than the overall pace. Sun leads the Unix server market with $2.8 billion in sales, 48 percent of the total.

Systems based on the Linux operating system and rack-mountable servers grew much faster than the overall server sector, IDC said. Linux server sales increased 178 percent from the third quarter of 1999 to the third quarter of 2000, while rack-mountable server sales grew 400 percent.

Rack-mountable servers are designed to be bolted into data centers housing dozens or even thousands of computers. Such central computing facilities are growing in popularity server share as companies such as Exodus Communications house Internet or other computing operations for corporate customers.

Linux is a clone of the Unix operating system that began as a hobby by volunteer programmers but has grown into a serious product endorsed by most of the biggest computer makers. IBM, one of the strongest Linux advocates, said it will spend $1 billion on Linux development in 2001.

In addition, VA Linux Systems specializes in selling Linux servers, while Red Hat, Caldera Systems, SuSE, Turbolinux and others work on software.

While revenue is an important measurement of a company's success, the number of units sold also is important. For example, software companies factor in how many servers are installed when deciding whether to support a particular brand.

Compaq is by far the leader by that measure, with 289,000 units shipped. Almost all are entry-level systems, which IDC defines as costing less than $100,000.

Second place went to IBM with 160,000 units. Dell shipped 150,000, HP tallied 122,000, and Sun followed with 97,000. HP slipped from second place a year ago, while Dell and IBM climbed up a notch.

In the high-end segment--servers costing $1 million or more--Sun was at the top of the list, selling 723 in the quarter. IBM sold 370, HP had 236, Compaq moved 219 units, and NEC sold 73. In this section, HP had the biggest growth, 146 percent, enough to push it past former third-place holder Compaq.

While Sun sold nearly twice as many high-end systems, IBM charged more. It had $922 million in high-end revenue, while Sun reaped only $750 million.

When it comes to the Unix server section of the market, Sun is still miles ahead. All of the 723 high-end servers Sun sold were Unix models, while HP sold 158, IBM sold 80, NCR moved 56, and Compaq sold 39.