NT Server Sales Slow in Third Quarter of 1998

Growth in worldwide sales of servers running Windows NT tapered off in the third quarter of 1998, according to a report from market research firm International Data Corp. (IDC, www.idc.com).

The slowdown reflects the tailing off of sales growth in the server market overall, according to IDC’s Quarterly Server Tracking program. "Major market turmoil in Japan coupled with worldwide price pressure have substantially contained revenue growth" in the overall server market, says Jim Williamson, an IDC senior research analyst.

In the overall server market, revenue dropped 3 percent from the third quarter 1997 to the third quarter 1998, even as the number of units shipped rose 15 percent.

The same factors extended to the Windows NT world, although the effect was less severe. Revenue from sales of servers running NT rose from about $1.5 billion in the third quarter of 1997 to about $1.8 billion in the third quarter of 1998, a 19 percent growth rate. Shipments rose from 190,676 units to 274,626 units, a 44 percent growth rate.

The slow down in revenue growth is dramatic when compared with the same time period from 1996 to 1997: a year-over-year growth rate of 76 percent. Even the year-over-year NT-server-sales growth rates for the first and second quarters of 1998 outstripped the third quarter, achieving about 31 percent for each quarter.

"Average prices were down about 17 percent from the same period a year ago. That’s a little faster than you would expect [prices to drop]," Williamson says of the third-quarter-of-1998 crop of servers running Windows NT. "There was a tremendous amount of difficulty in Japan, with revenue declining by 14 percent year over year. That was after a pretty good Q3 in 1997."

Meanwhile, year-over-year revenue from sales of servers running varieties of the Unix operating system grew at respectable 7 percent for the third quarter of 1998. "I think what you are beginning to notice is that a lot of companies are coming to the realization that NT can’t do everything and are investing in Unix," Williamson says. "In addidition, we saw Microsoft backing off some of the claims for 5.0," a reference to a speech by Microsoft president Steve Ballmer in October that lowered expectations for Windows NT 5.0/Windows 2000, which is slated to come out later this year.

The slower growth, however, doesn’t signal a coming slide for NT. "In all regions, we saw increases in NT shipments," Williamson says. "IDC still believes that NT has a very strong future."

Among hardware vendors, Compaq Computer Corp. held the lead in sales revenue from servers running NT with $521 million, or 29 percent of the total. Rounding out the top five in NT server sales were Dell Computer Corp., Hewlett-Packard Co., IBM Corp. and NEC Computer Systems Division.

The drop in revenue for the overall server market for the third quarter of 1998 was partly driven by slower sales of servers running Novell NetWare, which fell 12.3 percent; OpenVMS, which dropped 15.9 percent; and some other proprietary systems, which plummeted 31.6 percent.