Preliminary U.S. estimates from market researcher Dataquest also painted a gloomy picture of Hewlett-Packard's server situation: The company lost momentum in both units shipped and revenue, while all other major competitors posted gains.
Computer manufacturers increasingly are looking to servers and their fat margins to compensate for plummeting PC sales. Market researcher IDC, for example, reported PC sales growing a scant 0.3 percent in 2000 over the previous year, breaking a long-standing trend of double-digit growth.
But not all server manufacturers executed well in 2000. Dell Computer and Sun showed strong revenue gains, boosted by straightforward product lines, while HP and IBM posted declines, according to Dataquest. Confusing, overlapping server offerings hurt Compaq Computer, HP and IBM, the researcher said.
Only about $100 million separated Sun and IBM, which, respectively, posted $4.8 billion and $4.7 billion in U.S. server sales, according to Dataquest. Sun's revenue shot up 45 percent from 1999, while IBM declined 10 percent.
But lingering effects from year 2000 technology worries, parts shortages and new product releases pummeled IBM mainframe sales. Dataquest reported that Big Blue's mainframe revenue fell to $1.2 billion in 2000 from $2.2 billion a year earlier.
In just the third quarter, S/390 sales plummeted 24 percent as buyers awaited that machine's successor, the G7 mainframe, also known as the z900 server. At the same time, a shortage of ceramics used in chips shaved 6 percent off AS/400 sales. Earlier in the year, slow sales associated with year 2000 worries drove high-end server sales down as much as 40 percent.
"Where Sun in 2000 had a hit--and I would call it a triple for them--is in their new Netra servers," said Dataquest analyst Jeffrey Hewitt. The front-end Web servers helped drive up unit shipments and revenue. "It filled a hole, where before people almost always had to turn to Intel products," he added.
Compaq captured the third position with revenue of $3.9 billion, up 37.6 percent from 1999. Dell followed with $2.4 billion in sales, up 80 percent year over year.
"Dell's revenue growth is exceptionally healthy, and it's because of those unit shipments climbing," Hewitt said. Dell U.S. unit sales in 2000 rose 41 percent year over year. "They've moved upscale a bit. They're selling a little bit higher-end server than they used to," he added.
HP sales smitten
HP, with revenue of $2.2 billon, rounded out the top five. But whereas competitors saw healthy gains, HP server sales fell 12 percent.
"In the United States, you would expect HP to be in the top three, not No. 5," Hewitt said. He faulted the company's approach of responding to competitors rather than taking a leadership role. "Superdome is a good example," he said. "That was HP's response to the Sun UE10000" (Ultra Enterprise 10000).
Another issue for server makers is the clarity of the product line, Hewitt said.
"Sun at the high end has a clear focus," he explained. "When you go to Sun, you know you're going to get a Sun platform, as opposed to HP, where you might be running PA-RISC or you might be running Intel IA-64 or IA-32 or HP-UX, etc."
Dataquest last week released preliminary worldwide server unit shipments, placing HP one position ahead of fifth-ranked Sun. The market researcher is finalizing worldwide revenue estimates.
"Remember, these revenue estimates are just the United States, and we have to see how the worldwide numbers play out," Hewitt said. "We have to see if other countries buffer HP, but the U.S. numbers--the first glance at the picture--are not pretty."
Some of the problems plaguing HP also can be seen at Compaq and IBM, Dataquest warned. The market researcher concluded that both companies' server product lines are too complicated and overlap in too many places. IBM has benefited from some high-end servers positioned for specific tasks, but Dell and Sun are gaining rapidly with better-defined products.
"Dell's market share work again is very focused," Hewitt explained. "They have Windows, they have NetWare and Linux, and they have laid out where these things go. You can see the results in their growth."
Dataquest server revenue estimates measure only sales of hardware and not services, software or storage, which some companies could use to counterbalance weak hardware sales.
Compaq wins unit race
In terms of U.S. unit sales, Compaq easily took the No. 1 position, shipping 483,000 servers in 2000. Compaq's server shipments rose a healthy 15 percent over the previous year, Dataquest concluded. Dell followed with 349,000 servers shipped.
IBM, with shipments up 23 percent year over year, sold 240,000 servers. Sun followed, shipping 139,000 units, up 56 percent from a year earlier. HP was fifth, shipping 129,000 servers, a 6 percent decline from 1999.
Hewitt noted that Compaq posted strong growth in the majority of price segments. HP fared well with servers selling between $25,000 and $100,000, but posted declines in the $10,000 to $20,000 range and in the margin-rich segment of servers priced above $100,000.
Once again, HP lost sales to Sun, Hewitt concluded.
"It's been tougher for HP to compete in the high end, because Sun has more functionality," he said. "When you start climbing up into that space, you want more availability features that HP doesn't deliver."