Server Shipments Up, Revenue Growth Flat Vs. Last Year

While server revenue growth is flat compared with last year, shipments are definitely up, said Jeffrey Hewitt, principal analyst for Gartner Dataquest's servers worldwide program.

The typical sales cycle for low-end servers is about three months, compared with one to two years for servers valued at more than $100,000, Hewitt said. "The economy started falling at the end of 2000, when the dot-coms started failing," he said. "But we didn't see the impact until two quarters later. This year, a couple of quarters ago economists started talking about the recovery. So now we are seeing [second-quarter numbers that are up sequentially and year over year."

Eryck Bredy, president of Bredy Network Management, a Woburn, Mass.-based solution provider, said things are looking tough for the rest of the year, however. The pressure is still on in the server market due to low prices from Dell Computer and the surplus of hardware still to be assimilated after the fall of the dot-coms and other bankrupt companies, Bredy said.

Also, many clients are not upgrading because they are still happy with Windows NT 4.0, according to Bredy. "A lot of companies have to prioritize their IT investments," he said.

In terms of IA-32-based server revenue, including Linux-based servers, the new Hewlett-Packard beat Dell in a close race for No. 1, Hewitt said. HP reported IA-32-server-based revenue of $455 million for the quarter, compared with $439 million for Dell. IBM was a distant third at $233 million, followed by NCR at $20 million. Total revenue amounted to about $1.7 billion for the quarter, he said.

In terms of volume, HP beat Dell, shipping 125,000 units compared with Dell's 116,000 units, Hewitt said. IBM shipped 46,000 units, followed by Gateway with 5,500 units. Total shipments hit 433,000 units for the quarter.

Of those servers, the Linux-based market segment grew the fastest, Hewitt said. Total Linux-based IA-32 server revenue for the quarter was $220 million, up from $170 million in the same quarter of 2001. Dell was barely the leader, with $59.2 million, followed closely by HP at $58.6 million and IBM at $42 million. Linux-based IA-32 shipments grew more than 50 percent from last year, reaching 60,453 units during the quarter, compared with 40,600 units in 2001. HP led with 16,303 units, followed by Dell with 15,636 units and IBM with 8,315 units.

The race for No. 1 was not so pronounced in the RISC-based Unix market, said Hewitt. In revenue, Sun Microsystems led with $945 million, followed by HP at $334 million, IBM at $269 million and SGI at $51 million. Total revenue for the quarter was $1.6 billion. Sun shipped 42,000 units last quarter, compared with IBM's 7,000 units, HP's 4,000 units and SGI's 469 units. Shipments totaled about 54,000 units.

In all categories, Hewitt said the number of vendors with significant market share is dropping. "We used to talk about the top five or the top 10," he said. "Now we talk about the top three."