Gartner: Server Market Down Last Year, Short-Term Prospects Unclear

The research firm this week reported that U.S. vendors shipped about 448,000 servers overall in the fourth quarter of 2001, down 10.7 percent from the 502,000 units shipped in the same period last year.

Of the top 10 vendors, only Dell Computer's shipments grew year-over-year. The vendor shipped 105,000 servers for the quarter, up 6.7 percent from a year ago, giving it a 23.5 percent share of the market. Shipments from No. 2 Compaq Computer and No. 3 IBM were down about 21 percent each compared with the fourth quarter of 2000.

Dell may have bragging rights for the number of servers shipped, but the vendor also has the dubious honor of suffering the greatest drop in server revenue of the top five vendors. Dell ranked No. 4 in terms of revenue in the fourth quarter of 2001 at $387 million, down a dramatic 43.7 percent from the $688 million recorded the year before. Indeed, of the top 10, only No. 9 NCR fell faster in terms of revenue, while No. 10 Gateway tied with Dell.

On a quarter-over-quarter basis, the server market overall grew in the fourth quarter of 2001 to $4.3 billion, up 9.2 percent from $4 billion in the third quarter, according to Gartner Dataquest.

However, that year-end growth does not indicate an uptick in the market, said Shahin Naftchi, senior analyst for servers at Gartner Dataquest. That is because a lot of shipments were delayed into the fourth quarter because of the Sept. 11 attacks, and the fourth quarter is traditionally a better quarter for sales than the third quarter, Naftchi said.

Gartner Dataquest expects the first and second quarters of 2002 to show a pickup in sales compared with the recent past, but Naftchi said that could change because of fallout from the Enron scandal and the condition of the stock market in general.

In terms of individual vendors, IBM currently has the strongest server play overall, said Naftchi. IBM has done well because of its diverse customer base and market base, which is a big plus, she added. "And they have no competition in mainframes," she said. "The mainframe market was one of the biggest gainers for IBM servers."

Sun Microsystems' future is not so clear, Naftchi said. How Sun does in the Unix market depends in part on how well Intel does with the Itanium processor and on Sun's response to the Itanium, she said.

More ominous for Sun is the hit its traditional market is taking from the economy, said Naftchi. "Sun's main customers are dot-coms, telcoms and financial companies," she said. "The dot-coms are gone, and telcom and financial purchases have slowed down because of the economy."

How the potential Hewlett-Packard/Compaq merger might affect the server market is still unclear, as the two vendors have yet to offer a road map of how the combined company would look, Naftchi said. There is a lot of overlap between the two in the low-end and midrange markets, although HP has its own market in the high-end Unix space, she said. There will be a big conflict between the two sides in the Itanium-based server space, she said.