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IDC: Servers to turn the corner in U.S.

Sales of Linux or Windows systems with x86-based chips are driving a rise in U.S. spending on servers this year--the first increase since 2000, according to IDC research.

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Spending on servers is expected to grow 3 percent in the United States this year, marking what would be the first increase since 2000, according to a new IDC report.

Servers with x86-based Intel or Advanced Micro Devices chips, running on Linux or Windows operating systems, are driving the growth, with momentum also coming from blade servers and rack-optimized servers, IDC said. The report, released Monday, predicted sales of servers in 2003 and compared them with those last year. Its findings are the latest sign that the Unix-based server market is likely to continue to lose ground to the x86 Linux and Windows camps.

"As the market finds its feet, demand has shifted to new classes of products," Mark Melenovsky, director of server research at IDC, said in a statement. "Customers are betting IT dollars on a number of new platforms and architectures to prepare themselves to compete in a more Web-enabled marketplace."

Those products catching the attention of customers--especially small and medium-size businesses--include Linux and Microsoft servers, systems with processors based on the x86 architecture, rack servers and server blades, Melenovsky noted.

In the United States, server purchases are expected to reach $18.2 billion this year. But worldwide, spending is expected to remain flat at $49 billion.

In the worldwide market for x86 servers, systems running Linux are expected to rack up $3.1 billion in sales, an increase of 34 percent over last year. The market for Windows-based x86 servers is expected to grow 8 percent to $15 billion.

Global purchases of Unix servers, however, are expected to drop 5 percent to $19.8 billion this year, compared with 2002. And while Unix operating systems should hold onto the market lead with an expected 40 percent of worldwide server spending in 2003, they look likely to lose that top spot over the next couple of years, according to Steve Josselyn, an IDC enterprise server research director.

Unix will run a neck-and-neck race next year against Windows and Linux combined, Josselyn said. But by 2005, Windows and Linux are expected to account for 43 percent of server spending, with Unix at 39 percent. By 2007, Unix is expected to tally only 35 percent, he added.

Despite this, revenue from Unix systems is anticipated to remain steady, as the overall market for servers grows. IDC forecasts overall server spending to increase 2.8 percent on a compounded annual rate through 2007. IBM's provides a glimpse of this shift.

"We expect there to be small growth for 2004 and 2005, but then it will shrink. Sun (Microsystems) is able to drive the costs out of its servers on the low end and compete with Intel/Windows-based systems," Josselyn said. "But on the high end, Unix/RISC-based systems will eventually lose out to Linux and Microsoft."

In related news, IBM retained its ranking as top server maker for the second quarter, according to a Gartner Dataquest report released Monday.

The Armonk, N.Y., tech giant generated $3.2 billion in revenue during the quarter, up 8 percent over the previous year, Gartner Dataquest analyst Joseph Gonzalez said. As a result, Big Blue captured 30.7 percent of server sales.

IBM's Unix servers generated $934 million in second-quarter revenue, up nearly 19 percent compared with the same period last year. But its servers with Intel x86 chips saw sales to $115 million in the quarter, a 62 percent rise, according to Gartner Dataquest.

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