Vendors Jockey For Share In Server Markets

IBM increased its market share in these areas in 2004, but top vendors in both markets continue to wage a tight race, according to the research firm's recent server market-share report.

IBM, Armonk, N.Y., also extended its lead as the No. 1 overall server vendor in 2004, with 33.3 percent of total server revenue, gaining 1.2 points year over year, according to new IDC numbers. IBM's closest competitor, HP, Palo Alto, Calif., had 26.6 percent market share for 2004, losing half a percentage point year over year. A point is one-hundredth of 1 percent.

Sun Microsystems, Santa Clara, Calif., came in third with 10.5 percent market share, a loss of 0.7 of a point over its 2003 numbers. And Dell, Round Rock, Texas, came in just behind Sun with 9 percent of overall server market share, a gain of 0.4 of a point from 2003.

In the Intel-based server space, HP remained the leader with 34.5 percent market share for 2004, with Dell and IBM in a tight race for second with 20.1 percent and 18.4 percent market share, respectively. IBM edged out Dell for second place in the fourth quarter with 20 percent share to Dell's 19.2 percent—an edge the vendor touts as proof of its momentum in the space.

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Matt Eastwood, IDC's program vice president of worldwide server research and the author of the latest market-share report, said IBM has put some significant wood behind the arrow of its Intel-based server strategy, and the investment shows.

"IBM has doubled down and paid more attention to this space in the last three years," Eastwood said. "They were running further behind Dell and now slightly surpassed them."

He added that IBM has "some nice momentum" on its side in that space, having grown 25 percent year over year, more than any other vendor. Still, Eastwood said the No. 2 position is too close to call, despite IBM's gains.

IBM also has momentum in the Unix space, Eastwood said, although that market continues to be a "slugfest" between IBM, HP and Sun, with the lead shifting regularly, he said.

IBM took the No. 1 position in the survey for the fourth quarter of 2004, with 36.3 percent market share, nearly 10 points ahead of HP, which came in second with 27.6 percent. Sun was third with 25.3 percent share for the quarter. HP had held the third-quarter lead, with 32 percent market share over IBM's 26.5 percent.

In this tight market, a quarterly lead does not necessarily indicate a clear winner, Eastwood said. He said he expects Sun will move back into the lead sometime this year, toward the later end of its fiscal year, which begins July 1. "There's definitely a seasonality issue here that needs to be considered," he said.

HP continued to have a slim lead over Sun and IBM in overall Unix server revenue for the year, with 30 percent market share to Sun's 28.7 percent and IBM's 28.5 percent. Of the three vendors, Sun and HP lost market share, while IBM gained a little more than 2 points.

Bill Nemesi, a brand executive at Tallahassee, Fla.-based solution provider Mainline Information Systems, said there are valid reasons for IBM's market-share gains.

Nemesi attributed part of IBM's momentum to its strong blade server strategy. "As blades become a larger percentage of the overall market, it helps IBM's market share in the Intel space," he said.

IBM, too, in contrast to HP and Sun, has "stayed the course" with its server strategy over the past couple of years, while HP and Sun have had their challenges, Nemesi said.

HP's 2002 merger with Compaq left some uncertainty among customers as to which products would survive, he said. HP also was hindered by its support for Intel Itanium, which never got off the ground.

Sun has been plagued with strategic problems of its own, including highly publicized financial losses due to its late entry into the x86 market and a still unproven investment in software, Nemesi added.