IBM steals server sales from Sun

Sales of IBM servers increased 10.1 percent to $3.2 billion, giving Big Blue 30.4 percent of the $10.6 billion market, according to new figures released by market share researcher IDC. Third-ranked Sun Microsystems, meanwhile, saw revenue fall 18.7 percent to $1.4 billion.

The 2002 merger with Compaq Computer wasn't enough to put second-place Hewlett-Packard ahead of IBM, but the company did increase server sales a slight 0.4 percent to $2.9 billion, IDC said. Fourth-ranked Dell increased sales 10 percent to $980 million.

The numbers indicate that IBM, which Sun had trounced in the late 1990s, is now well along its road to recovery.

Sun's second calendar quarter typically is strong because it's the final quarter of the company's fiscal year, but in 2003 Sun deliberately refrained from sales incentives that it feared could pull in sales from the next quarter, a problem that occurred in 2002.

Selling servers has been a punishing business since customers stopped buying them willy-nilly in the late 1990s. The market for the systems, used for networked data processing and storage tasks such as supermarket sales and or online banking, dried up after the Internet mania subsided and the recession hit. IDC predicted in May that server sales would be flat from 2002 to 2003 then grow from there, but even the $58 billion IDC expects customers to spend on servers in 2007 will be less than the $70 billion they spent in 2000.

Server sales in the second quarter didn't shrink this time around, though the 0.2 percent growth was hardly torrid.

Sun focuses chiefly on servers running the Unix operating system, a line that was particularly popular in the Internet go-go years, and the company remains tops in that segment with 33 percent of the $4.33 billion market.

But Sun's 19.1 percentage drop in sales to $1.43 billion meant it lost 5.7 percentage points compared with the same quarter of 2002, while No. 3 IBM's 20.4 percent revenue growth to $1.06 billion meant it gained 5.2 percentage points to reach 24.6 percent of the market. No. 2 HP saw its Unix server sales dropped 3.6 percent to $1.36 billion.

Unix servers historically have accounted for the largest single fraction of the server market. Now servers based on Intel processors are a larger market, though, according to IDC. In the second quarter, the market for servers based on Intel processors grew 10.7 percent to $4.46 billion, while the Unix server market dropped 5.2 percent to $4.33 billion.

The top Intel server seller remains HP, with 33.1 percent of the market, but it and No. 2 Dell lost share to IBM. IBM's Intel server revenue grew 23 percent to $778 million, while HP's grew 9.2 percent to $1.48 billion and Dell's grew 10 percent to $980 million.

Sales of servers using the Linux operating system increased 40 percent to $650 million, with HP holding 28.9 percent of that market, Dell at 20.5 percent and IBM at 19.4 percent, IDC said.

"Blade" servers, a newer server idea in which several thin servers share the space and hardware resources of a larger chassis, grew 693 percent from a small base to reach $119 million. HP led the market with 31.9 percent share, but lost ground over 2002 to new arrivals IBM, with 26.9 percent, and Dell, with 15.1 percent of the market.