Server sales--Sun wins the battle, but IBM the war

Summary:Sun Microsystems may have won round one in the fight for server market share in the United States, but IBM has come back with a swift uppercut to take the lead in the worldwide server market. Recent numbers from market researcher Dataquest show Armonk, N.

Sun Microsystems may have won round one in the fight for server market share in the United States, but IBM has come back with a swift uppercut to take the lead in the worldwide server market.

Recent numbers from market researcher Dataquest show Armonk, N.Y.-based IBM (ibm) is still the top dog with regard to server sales worldwide, pocketing $13.74 billion in revenue for 2000.

Last week Dataquest released a report on the status of the server market in the United States, which showed Sun (sunw) had managed to nudge past IBM with $4.8 billion in sales last year. The Internet boom has benefited Sun in the domestic market, as start-ups and traditional companies alike have raced to embrace e-commerce and build up their technology infrastructure.

The worldwide statistics put IBM back in the lead--but with a catch. Big Blue's server revenue for all of 2000 increased only a smidgen from the $13.73 billion of 1999, leading overall but trailing Sun in growth. Sun shipped $9.7 billion worth of servers in 2000--up 28 percent from the $7 billion worth shipped in 1999, according to Dataquest figures.

IBM closed the year on a positive note. Revenue for the fourth quarter grew a whopping 84 percent, from $2.16 billion in 1999 to $3.99 billion in 2000.

Sun meanwhile grew a comparatively modest 35 percent for the fourth quarter, from $2.05 billion to $2.76 billion, Dataquest said.

Servers have become a hardware must-have as companies seek to incorporate the Internet as well as private computer networks into their operations. Because servers are powerful and complex machines, they command higher profit margins for those companies that sell them.

Sun Microsystems took the server world by storm in the second half of the 1990s, selling servers that used the Unix operating system while IBM, Hewlett-Packard and Compaq Computer were grappling with more complicated product lines that employed a multitude of chips and operating systems. The dot-com boom late in the decade only helped to grow Sun's position in the industry.

Speaking too soon
Amid a weaker market, however, Sun is having a harder time. On Thursday, it warned of diminishing revenue, words that stand in stark contrast to Sun's boasts just a month ago that it met expectations, a statement issued while rival HP was delivering more dire news.

IBM, meanwhile, has learned some lessons from Sun. It's taken steps to simplify its product offerings, unifying its four server lines under the "eServer" brand name and moving aggressively to recapture the Unix server market.

IBM said that from the fourth quarter of 1999 to the fourth quarter of 2000 its Unix server revenue grew 49 percent--a figure that caught some analysts' attention.

"Clearly, IBM is gaining share in Unix," said UBS Warburg analyst Don Young in a research note Friday. "The robust Unix trend is continuing for (IBM), the first time in years that any vendor has matched or outgrown Sun in the Unix space."

In the race for third place for 2000, Compaq passed HP with 27 percent revenue growth, from $6.77 billion to $8.6 billion. HP's server sales grew 3 percent from $6.97 billion to $7.16 billion.

In addition, Compaq sold the most servers when measured by unit shipments instead of revenue. The company became the first to sell more than a million servers, according to Dataquest.

HP's server revenue for the fourth quarter actually shrank, according to Dataquest. Sales of $1.82 billion in the fourth quarter of 1999 dropped 5 percent to $1.77 billion in the fourth quarter of 2000.

Dell Computer, in fifth place, saw revenue growth of 72 percent from $1.99 billion to $3.44 billion, Dataquest said. Dell sells servers based only on Intel chips, whereas the other four have higher-end designs with more expensive chips.

Topics: Servers, Dell, Hardware, Hewlett-Packard, IBM, Operating Systems, Software

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