Cautious optimism as server market shows growth

The worldwide server market is growing again after two years of contraction, according to the latest figures from IDC.

The worldwide server market is growing again after two years of contraction, according to the latest figures from IDC.

Server sales for the third quarter of 2003 grew by 2% compared with the same period the previous year, said Mark Melenovsky, program director in IDC's server group.

Worldwide server revenue, which includes the costs of server hardware, operating systems and initial storage shipments, reached $10.8bn, up from $10.6bn for the same quarter a year ago.

Measured by the number of units shipped, the server market grew by 19.5%, led by strong sales of servers based on processors from Intel and Advanced Micro Devices.

The server market did post a slight gain of 0.2% in the previous quarter, but when it announced its second-quarter figures IDC said it was too early to predict a rebound in the server market, which had just experienced nine consecutive quarters of decline. 

IDC's analysts voiced cautious optimism with yesterday's numbers.

"This is a good sign and, I think, a sign that spending for enterprise IT is on a growth target," Melenovsky said. He predicted that the market would grow by 2-3% year on year next quarter, and that server sales for 2004 would increase by about 5%.

IBM retained its lead of the server market, with a 31.1% market share on revenue of $3.4bn. Hewlett-Packard was second, with 27.7% on $3bn in revenue, followed by Sun Microsystems and Dell, with 10.8% and 9.5% of the market, on sales of $1.17bn and $1.03bn, respectively.

IBM extended its lead over HP slightly by posting strong growth in all of its server lines. IBM's server revenue grew by 6.6% year on year.

Its pSeries Unix systems did particularly well, bucking an industry trend and growing by 2% in a Unix server market which shrunk by 3.8% overall. The gains were partly because of a wide-ranging refresh of IBM's pSeries servers, many of which were upgraded to Power4+ processors this year.

Sun was the hardest hit by the decline in Unix spending. Its market share dropped by 9.3% from the same quarter in 2003.

Strong growth in the Linux market, which grew by 50%, took its toll on Sun, Melenovsky said.

Linux systems sold particularly well in high-performance computing clusters as well as the web infrastructure market, and did not appear to be affected by claims of intellectual property violations in the Linux operating system being made by the SCO Group.

Windows server sales also grew at a respectable pace, increasing by 10% from the previous year and slightly exceeding IDC's expectations for the quarter.

"There are a lot of systems that were bought in 1999 or 2000 that are three or four years old now, and are being replaced," Melenovsky said.

When measured by the number of units shipped, Windows remained far ahead of Linux, with 841,000 Windows servers shipped in the quarter, compared with 210,000 Linux boxes, he added.

Robert McMillan writes for IDG News Service

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