IBM and HP Displace Sun as Unix Server Leader

Jockeying for position in market share, revenues, growth

Hewlett-Packard Co. and IBM Corp. tied for first place in the Unix server market in Q4 2002, displacing perennial leader Sun Microsystems Inc., according to a research study released by International Data Corp. (IDC) last week.

On the whole, IDC finds, Q4 server market revenues declined by 5.2 percent over their 2001 levels, to $12.3 billion. At the same time, IDC indicates that server market sales surged by 15.2 percent from Q3 to Q4 2002—the strongest sequential growth in the last three years.

For the quarter, IDC finds that IBM was again the overall leader, with a 36.2 percent share of the server market on $4.2 billion in revenue. During a period in which Sun struggled to grow share—by .2 percent, at that—and HP actually lost 4 percent, IBM extended its overall market share lead by 2.2 percent.

In addition to RISC-Unix and Intel-based servers, the overall server market also encompasses big-ticket items, such as zSeries mainframes and iSeries minicomputers, both of which combine to give IBM a revenue edge over other vendors. But during Q4 2002, IBM also grew its share of the Unix market—in particular—at an impressive rate.

IBM, HP Tops in Unix

During the fourth quarter, Big Blue and HP were locked in a dead heat for control of the Unix server market, each with about 30 percent share. Erstwhile champ Sun, on the other hand, followed closely behind with 28 percent.

If IDC is to be believed, it was a tough 2002 for Sun. First, in March, the researcher announced that IBM had surpassed Sun in Q4 2001 to capture the overall lead in Unix server revenues with 26.9 percent. It was the first time since 1998 that IBM was tops in Unix. Sun regained its lead during Q1 and held it through Q2, but in Q3, IDC reported that HP had edged out Sun for control of the Unix market, 32.9 percent to 30.4 percent. The upshot is that Sun—which dominated the Unix server market during the late 90’s—has trailed in IDC’s tallies for two of the last four quarters.

For the year, IDC finds, IBM trailed both market leader Sun (32 percent) and HP (30 percent) in Unix server revenues. However, if HP’s revenues were combined with those of Compaq Computer Corp., IDC says, it would have tied Sun for control of the market.

Big Blue has historically trailed both Sun and HP in the overall Unix market—often by a wide margin. Over the last two years, however, it has attacked the Unix server market with renewed vigor, first scaling the high-end with the announcement of its 32-way pSeries p690 in November 2001, and later (in the second half of 2002) focusing on the midrange and low-end, with the release of an eight-way system, the p650, along with the introduction of its new Power4+ processor in its p650 and four-way p630.

In an interview last month, Jim McGaughan, director of eServer marketing with IBM, acknowledged that the company was chasing both vendors in the midrange and low-end, but speculated that an emphasis on aggressive pricing could turn the tide in IBM’s favor. “We’re coming after [Sun and HP] with a vengeance. We feel that with our pricing, we’re the best value in Unix” in not only the high-end, but also at the low-end and midrange, McGaughan asserted.

While overall server revenues declined by 5.2 percent in Q4, IDC found that Unix server revenues dipped by 9 percent from their year-ago levels.

Unix Market in Flux

IBM has twice surged ahead of competitors in the Unix server market space during the fourth quarter of a calendar year, first in Q4 2001 and then in Q4 2002.

According to IDC, companies generally enjoy a better sales cycle during the final quarter of their fiscal years. The fourth quarter of IBM’s fiscal 2002 coincided with the fourth quarter of calendar year 2002, while Sun’s fourth quarter is the second quarter of the calendar year.

Although IBM collected 26.9 percent and 30 percent of overall Unix server revenues during the fourth quarters of 2001 and 2002 respectively, its performance has been flat at other times. During Q1 2002, for example—when IDC says that Sun rebounded to control the overall Unix market with 34 percent—IBM garnered a 17 percent share. In the second quarter of 2002—which marked the last quarter of Sun’s fiscal year—Sun grabbed a 39 percent share, according to IDC. During the same period, IBM was a disappointing third with 20 percent share, trailing HP with 30 percent.

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.