Dell, IBM dominate flat third-quarter server market

IBM Corp. and Dell Computer Corp. dominated worldwide third-quarter server sales, as they were the only major vendors to gain market share when compared to the same quarter last year, according to the most recent data from Gartner Inc.

Overall, server revenue slipped in the third quarter even though the number of shipments rose. Sever makers are locked in a fierce price war in the high end and low end of the markets with many offering large discounts on systems well below their advertised prices, according to the vendors. A total of 1.14 million servers were shipped in the quarter, generating US$10.5 billion in revenue, according to Gartner. This compares to 1.07 million servers being sold last year in the third quarter for US$10.9 billion.

Shahin Naftchi, a senior analyst at Gartner, noted that a number of factors contributed to the rise in shipments and drop in revenue.

“This trend happened because of a couple reasons,” Naftchi said. “The first is the economic situation led to more customers buying low-end servers, and the second was price competition. Products that used to be in the midrange dropped into the low end because of the price cuts.”

In addition, these numbers compare to the same quarter last year when the U.S. was shaken by the Sept. 11 terrorist attacks in New York. This caused an economic disruption in the U.S and abroad, so higher server shipments this quarter may not reflect a healthier market for the long term, Naftchi warned.

IBM made one of its strongest showings in recent memory during the period with gains in both its RISC (reduced instruction set computing)-based server and Intel Corp.-based server businesses. Dell also performed well with its core Intel-based server line while rivals Hewlett-Packard Co. (HP) and Sun Microsystems Inc. struggled with their server operations.

“IBM was the star of the quarter,” said Naftchi, noting that IBM’s pSeries Unix servers and xSeries Intel servers performed well.

In the third quarter, IBM grabbed 32 per cent of the overall server revenue up from 30 per cent in the same quarter a year ago. Dell also managed market share gains upping its take of server revenue to 7.7 per cent as compared to 6.5 per cent a year earlier. HP shed 2.2 points of revenue market share down to 24.5 per cent, and Sun dropped 0.9 points to hold 12.6 per cent of the market, according to Gartner.

In the lucrative Unix server market, IBM made its largest gains, while HP and Sun lost share. IBM made 11 per cent more revenue this quarter versus last year and increased its market share by 3.8 points to hold 23.6 per cent. Sun held onto its position as the Unix leader with 33.7 per cent of revenue, dropping 1.1 points in market share. HP also shed 0.7 points of share to finish with 31.1 per cent of the market, according to Gartner.

Sun did well with its low-end and high-end servers but suffered heavy losses in the midrange of the market, Naftchi said.

IBM also gained share in the lower priced Intel server market. The company captured 19.1 per cent of the market in revenue up from 15.4 per cent a year ago. Dell also gained share, grabbing 19.6 per cent of the market up from 17.1 per cent. HP shed 4.4 points of market share but remained the overall leader with 29.4 per cent of the market, according to Gartner.

HP led all vendors with 337,084 servers shipped during the quarter. Dell moved 214,847, IBM shipped 161,190 and Sun shipped 61,457.

IBM, however, led in revenue with US$3.4 billion. HP followed with US$2.6 billion. Sun sold US$1.3 billion, and Dell rounded out the top four vendors with US$814 million.