IDC: Y2K Weakens Server Market Revenue

The overall server market slowed in the third quarter of 1999 as a result of Y2K concerns, according to International Data Corp. (IDC), but sales of servers loaded with Windows NT boomed.

The IDC (www.idc.com) Worldwide Quarterly Server Tracker, a quarterly report of the global server market, indicates that server market revenue dropped to $13.5 billion, a 10 percent dip from the quarter a year before. The U.S. market declined a more gradual 3 percent from the same quarter in 1998, dropping to $5.2 billion.

IDC suggests the decline is a result of a drop-off in sales of high-end systems. "The [third quarter 1999] revenue decline was led by high-end systems as companies suspended system capital purchases to wait for the turning of the new year," says Hoang Nguyen, research analyst for IDC's Worldwide Quarterly Server Tracker. Nguyen expects the market slowdown to continue into the first few months of 2000 as IT departments begin to refocus their energies into future purchasing decisions.

Despite the overall decline, the entry server class grew significantly as e-commerce and other Internet needs spurred the purchase of these servers.

The segment expanded 12 percent to $7.2 billion, making it the strongest sector of the market.

Windows NT had healthy growth among operating systems, exploding 78 percent domestically and 46 percent worldwide in year-over-year sales for the quarter. NT’s growth corresponds to the growth in the entry sever space, which NT dominates with a 35 percent market share.

Nguyen doesn’t expect the Feb. 17 release of Windows 2000 to immediately impact the server market. He says, "Hardware vendors are reluctant to install Windows 2000 on high-end machines until Windows 2000 proves that it is reliable and scalable."

IBM Corp. (www.ibm.com) remains the top vendor in server sales, but its sales declined 29 percent worldwide for the quarter, accompanied by steep declines in sales for its OS/390 and OS/400 operating systems.

The No. 2 U.S. server vendor, Compaq Computer Corp. (www.compaq.com), grew revenue 9 percent to $1.9 billion for the time period.

Strong sales in the Hewlett-Packard Co. (HP, www.hp.com) Netserver family boosted HP's revenue modestly.

Outpacing the market, Dell Computer Corp. (www.dell.com) and Sun Microsystems Inc. (www.sun.com) grew at year-over-year rates of 40 percent and 18 percent, respectively.

Unix was still the dominant operating system for servers, but Unix revenue declined 8 percent domestically and 4 percent globally. This was partly due to the decline in high-end systems. Novell’s NetWare grew slightly, bringing in 5 percent more money than the same time last year.