Opteron-Based Servers Propel Sun's Growth

During the first quarter, Sun grew server revenue faster than IBM, HP and Dell, while its unit sales grew at about the same pace as those competitors, with the exception of IBM, according to the Gartner data. (See tables, pages 2-3)

Sun's market share in revenue increased from 9.8 percent in first quarter 2005 to 10.5 percent in the first quarter this year. However, Sun's market share in unit shipments fell from 4.7 percent to 4.4 percent over the same period, showing that Sun's average unit selling price was greater than the industry average.

While Sun's average unit selling price was higher than the industry average, it was also decllining. Sun's server revenue was 7.6 percent higher during the first quarter over the year-earlier period, while its unit shipments were up 8.1 percent.

Sun's lower average selling price for servers and its server revenue growth coincided with the release of its Opteron-based Galaxy product line, which debuted last September and opened the x86 market to Sun and its representatives.

Sun solution providers said Sun's recent product mix has significantly increased their sales opportunities. “We've been shipping [the Galaxy servers] as fast as Sun can make them," said Mike Thompson, president and CEO of Groupware Technology, Campbell, Calif. Peter Gailey, executive vice president of sales for Technologent, Lake Forest, Calif., said: "The Opteron-based products have increased our potential market."

Thompson said that while the Galaxy servers' ability to run Windows gets Groupware's foot in the door, about half of these servers end up running Linux and the other half end up running Solaris 10.

It's mainly the total cost of ownership argument that wins sales, he said, and it has several components. One part is the electricity costs, which he said is making a difference in sales, especially in California. The AMD Opteron processor takes less electricity to run than competing products and it runs cooler, which cuts down on data-center cooling costs. Also, Thompson said, the Galaxy servers are redundant systems and provides lights-out management, both of which contribute to lower maintenance costs and less downtime than with comparable products.

Another component of the TCO advantage is the Galaxy servers' price/performance, he said. The Galaxy servers have to win on TCO because their average selling price is still higher than that of most x86 machines.

Reseller margins on the Galaxy line are slimmer than even the slim SPARC-based machines' margins, Thompson said, but the higher volume of sales more than makes up for it.

Both Gailey and Thompson hinted that Sun has some related new products on the horizon, but were under obligation to say nothing further.

Gailey added that it's not just Sun's server strategies that have helped sales. Sun's StorageTek acquisition has helped with Technologent's storage hardware and service sales because of StorageTek's capability to service any device of any brand inside a data center.Table 1
Worldwide Server Vendor Revenue Estimates for First Quarter of 2006 (U.S. Dollars)

Source: Gartner Dataquest, May 2006

Table 2
Worldwide Server Vendor Shipments Estimates for First Quarter of 2006 (U.S. Dollars)

Source: Gartner Dataquest, May 2006