CXO

IBM sees growth in server market

Big Blue nibbles away share from rivals Hewlett-Packard and Sun Microsystems.

Stay on top of the latest tech news with our free IT News Digest newsletter, delivered each weekday. Automatically sign up today!

By Stephen Shankland
Staff Writer, CNET News.com

IBM increased its lead in a growing server market, nibbling away share from rivals Hewlett-Packard and Sun Microsystems, according to figures to be released Wednesday.

Sales of servers worldwide increased 5.5 percent to $11.5 billion in the third quarter of 2004 compared with the year-earlier quarter, according to market researcher IDC. IBM's sales grew faster, though, with revenue increasing 6.3 percent to $3.4 billion, giving Big Blue 31.7 percent of the market.

No. 2 HP grew slower than the market, increasing sales from $3 billion to $3.1 billion. Dell and Sun were essentially tied for third place, with Sun at $1.18 billion and Dell at $1.17 billion—but Dell's sales increased 14.1 percent compared with Sun's 0.1 percent, IDC said.

The overall market growth has been under way for six consecutive quarters, but only recently has it become strong, IDC analyst Vernon Turner said. Information technology spending now includes more new projects rather than just maintaining the status quo, he said.

"For a while the growth was close to inflation. Now we're seeing growth beyond inflation, which shows it is back to strategic thinking instead of just maintenance thinking," Turner said.

IBM and Dell rising while HP and Sun lose share of revenue has been a common theme in server market share statistics in recent quarters. So has the fifth-place position of Fujitsu and its European arm, Fujitsu-Siemens, whose sales grew 4.4 percent to $714 million.

In other findings:

• Linux server sales grew 42.6 percent to $1.06 billion—the ninth consecutive quarter of growth greater than 10 percent. HP leads the market with $287 million in sales, with IBM in second at $219 million and Dell third at $185 million, Turner said.

• Mainstream "x86" processors with 64-bit extensions to accommodate more memory, such as Intel's "Nocona" model of Xeon and Advanced Micro Devices' Opteron, are catching on. About 60,000 Nocona-based servers and 52,000 Opteron servers were sold, IDC said. About 60 percent of the Opteron systems run Linux, which supports the 64-bit extensions today, whereas most Nocona systems run 32-bit Windows, which won't get 64-bit x86 support until 2005.

• Overall, x86 server sales grew 18.3 percent to $5.4 billion, the third quarter in a row that they've been greater than sales of servers using reduced instruction set computing, or RISC, chips such as IBM's Power, Sun's UltraSparc and HP's PA-RISC.

• Unix servers, which most often use RISC chips, declined in sales 2.3 percent to $4 billion, though unit shipments increased 8.3 percent.

This quarter—a seasonally weak one for longtime leader Sun—Hewlett-Packard was No. 1 in the Unix market at $1.27 billion, Sun No. 2 at $1.14 billion and IBM No. 3 at $1.05 billion. IBM revenue increased 2 percent, but Sun dropped 2 percent, and HP lost 6 percent.

• Revenue from servers running Windows grew 13.3 percent to $3.9 billion, essentially tying Unix server revenue.

• More than 75,000 blade servers were sold, a $287 million market for the quarter, with IBM keeping its top spot with 44.2 percent of revenue. Turner predicted blade servers will be a $1 billion business for the full year of 2004.

Blade servers are getting more powerful. "End-user spending for blade servers in the third quarter exceeded our expectations as we saw a shift in mix away from single-processor blades to dual- and quad-processor blade systems," IDC analyst Jessica Yang said in a statement.

Editor's Picks