IDC Issues Mixed Report on Server Revenue

A report last week from market research firm IDC had bad news for the computer industry butgood news for IBM Corp. While overall,revenue in the server market dropped 30% IBM grew in market share in somesegments and grew in revenue in one particularly important segment.

According to IDC’s “Worldwide Quarterly ServerTracker,” IBM’s mainframe revenue grew nearly 21% year-over-year for the thirdquarter. While most of the high-end server market suffered – sales of serversover $1 million dropped 27% year-over-year – IBM’s flagship product sawtremendous growth.

IBM also saw growth in the worldwide Unix servermarket, a market Big Blue believes is key for its future. The segment saw a 19%shrinkage in revenue, compared to 2000. IBM’s share of this market grew,however, by 5.6 percentage points.

In contrast, Sun Microsystems,Inc., the largest Unix vendor by revenue, lost ground. Its share of theUnix pie dropped from 39% to 28.8%. Hewlett-PackardCo. was the second largest Unix vendor with 28.5% of revenue in theworldwide Unix market.

Chuck Bryan, director of IBM eServer marketing at IBM,attributes IBM’s jump in market share to a number of factors. One is therelease of IBM’s “Regatta” server, which puts multiple processors on a singlechip. Another is IBM’s partnerships with software vendors. “ISVs are going inand recommending products for us,” he says.

Overall, the Unix market was down 19% compared to thethird quarter 2001. Although the market is dropping in size, it is gaining inimportance for IBM. A recent Gartner Group report says IBM’s pSeries serverswill be key to IBM’s future growth, as it begins to depend more on services andsoftware platforms, rather than proprietary platforms.

According to its press release, IBM is the number oneserver vendor, regardless of platform. It says Big Blue “outsells Sun by 113percent.” Because Sun competes with IBM only in the Unix market, it may bemisleading, since IDC includes mainframe, midrange, Unix, and Intel-basedservers in these figures.

Bryan says the focus on Unix does not suggest the Unixmarket is suddenly more strategic for IBM. “Its like ‘what child do you likethe best,’” he says, “They’re all strategic – otherwise we wouldn’t have a needfor them.”

IDC does say IBM leads the market in server revenue,but Sun is hardly its closest competitor. CompaqComputer Corp. – which is first in the Intel server market - takes therunner-up spot, followed by HP. Sun comes in fourth, and the runner-up inIntel-based servers, Dell Computer Corp. isfifth. – Chris McConnell