It comes as no surprise that server revenues in the first quarter of 2002 contracted by 15.2% to $10.6bn, according to Gartner Dataquest.
Given the glut of processing capacity which companies have sitting around these days and the price wars that are ensuing in the market as too many vendors chase too little demand.
IBM Corp is back up to its traditional 27% or higher market share in the worldwide server market in terms of revenue, with $2.9bn in sales, which comes to a 27.8% share.
That market share increased by 2 points compared to a difficult first quarter of 2001, but it is down 4.5 points from the fourth quarter of 2001 when IBM garnered more than 32.2% of worldwide server sales according to Gartner Dataquest.
At the time, IBM was widely believed to be aggressively cutting prices to eat market share, and at the expense of rival Sun Microsystems Inc. But IBM has back off a little in the first quarter of 2002 because IBM's new CEO, Sam Palmisano, has to start making money in servers again so he can afford to keep other less-profitable IBM units afloat.
Compaq Computer Corp lost a half point of market share in the first quarter of 2002, but Hewlett Packard Co, which now owns Compaq, gained a half point of market share. Together, the new HP accounted for 25.8% of server revenues worldwide, or just over $2.7bn.
Sun was the number three server vendor worldwide ranked by revenues, with about $1.8bn in sales and 17.5% of the server pie in Q2 2002. Sun increased its share by 0.6% in Q2, but the real story is that it gained nearly three points of market share compared to Q4 2001. Sun has very likely figured out that there is more price elasticity in the market for its new UltraSparc-III servers than it anticipated and, as such, is losing fewer deals to rivals like IBM and HP. The Cobalt Linux appliances almost certainly help boost server sales as well.
Dell, with 6.9% of the worldwide server market, or about $725m in sales, also saw its market share hold rock steady compared to the first quarter of 2001. Dell gained one point of market share sequentially from the fourth quarter of 2001, putting it back to the same share it had in the first quarter of 2001.
To some ways of thinking, market data for Unix and Linux servers ought to be lumped together since no one is thinking of them as distinct in the same way that a Unix server is, for instance, substantially different from a Windows server. Then again, an Intel server is an Intel server, and it can run Windows or Linux or FreeBSD or, if the mood strikes you, NetWare or OS/2 Warp or Solaris 8 for X86.
To software companies and their customers, tracking servers by operating system platform is the most important thing; to hardware companies, particularly those who do not control all or any of the operating systems they sell on their server platforms, the only thing that matters is the processor architecture of the server. Everyone is going to have to think about this two ways for a while--and hopefully for a long while, because the day when there is only one server architecture is the day when this is no fun anymore.
Unix servers accounted for about $4.5bn in sales in the first quarter, and Linux server sales (presumably across all server architectures), according to Dataquest came close to $400mn. The Unix server market in the first quarter of 2002 contracted by close to 16% in the quarter, down from $5.3bn in sales in the first quarter of 2001, and the Linux server market expanded by nearly 55 percent in the quarter. But the Unix contraction was almost twice the size of the entire Linux server market and four times the size of the expansion of Linux server revenues in the quarter.
Linux, particularly on Intel architecture servers, is not only eating into Unix server sales by putting price pressure on Unix boxes, it is probably eating into footprint counts, too. This causes a double whammy on Unix revenues. That said, the day still seems distant when Linux will usurp the position of Unix in the commercial server market, at least as far as aggregate revenues are concerned. In terms of revenues, the Unix/Linux server market contracted by 12.5%.
When it comes to the combined Unix and Linux server market, Sun is still the market share leader with $1.9bn in sales and 37.7% of that combined market. This is about the same market share that Sun held a year ago, and is an increase of more than three points of market share compared to Q4 2001.
The new HP is the number two Unix/Linux server vendor, with a combined 27.9 percent of that market; 21.9% of that Unix/Linux share comes from HP, 6% comes from Compaq. HP gained one point of market share year-over-year, and Compaq lost 0.7 points of share. IBM lost 2.6 points of market share compared to the fourth quarter of 2001 in this Unix/Linux market, but increased its position by 0.6 points compared to the first quarter of 2001.
In the Intel-based server market, HP is the dominant supplier now that it owns Compaq, with nearly $1.3bn in IA-32 and IA-64 server sales out of a total market that reached $3.9bn, down 14.3% from sales in last year's first quarter. HP was able to get a 32.8% share of the IA server revenues with these sales.
However, HP lost one point of market share in this IA server market as Compaq gained 0.6 points. IBM's share of the Intel server market grew by 2.8 points to give Big Blue $580mn in sales and 14.8% of the Intel-based server space in Q1 2002. But Dell, with 18.5% of this market and $725mn in sales, is still outpacing IBM. IBM and HP are out-shipping Dell when it comes to Intel machines that cost more than $25,000 and less than $100,000. IBM has almost pulled even with HP/Compaq in this sector of the Intel server market, and have over eight times as much revenues than Dell in this space.
There are profits to be made here, to be sure, but unfortunately for IBM and HP, the big revenues in the Intel space are on small and inexpensive machines. This is where Dell is making them work extra hard with its direct sales model and aggressive pricing.
© ComputerWire. All rights reserved.