GOVERNMENT

According to IDC's Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market grew 5.1% to $14.4 billion in the fourth quarter of 2004, marking the seventh consecutive quarter of positive growth. Worldwide server unit shipments growth slowed modestly to 15.7% in 4Q04 when compared with the year-ago period. For the full year 2004, worldwide server revenue grew 6.2% to $49.0 billion, while worldwide unit shipments grew 19.3% to 6.3 million units. IBM led the overall server market in 2004 with 33.3% revenue share, followed by HP with 26.6% share. The volume server segment (servers priced less than $25,000) was the only market segment that experienced revenue growth in 4Q04, while midrange enterprise servers ($25,000 to $499,999) and high-end enterprise servers ($500,000 or more) showed declining revenue. This reflects both a decline in unit shipments for those server classes and continued price compression, which reduces average sales prices for these servers. This pattern is very different than what was seen in the fourth quarter of 2003, when all three segments grew as server market revenue surged at year end. Once again, volume servers are leading the market in both revenue and unit shipment growth, demonstrating the dramatic impact that these systems are having on the worldwide server marketplace. "Volume servers are being deployed in rich configurations, and in scale-out cluster configurations, to take on a wider range of enterprise workloads," said Matthew Eastwood, program vice president of IDC's Worldwide Server Group. "This trend towards modularization shows that customers are also increasingly embracing blade computing and both scale-out and scale-up server virtualization technologies as they refresh and expand their IT infrastructures." Overall Server Market Standings IBM held onto its number 1 spot in the worldwide server systems market with 38.2% market share in factory revenue, growing factory revenue by 6.5% year over year. This growth was driven primarily by strong performances from both its xSeries and pSeries servers. HP maintained the number 2 spot with 25.9% share, growing revenue 5.9% compared to 4Q03. HP's growth stemmed from strong Proliant server performance. Similar to the previous quarter, there were a statistical tie for the third position between Sun and Dell. Sun, with 9.4% revenue share, posted a 3.7% decline in revenue from a year ago, although unit shipments grew 7.9%. Dell grew revenue by 10.8% compared to 4Q03, ending with 9.0% revenue share. Fujitsu/Fujitsu-Siemens, experienced a 6.8% decline in factory revenue holding 4.7% revenue share in 4Q04. x86 Industry Standard Server Market Dynamics Boost Overall Growth The x86 server market continued to experience strong growth, with revenue of $6.3 billion worldwide for the fourth quarter of 2004. Factory revenue for x86 servers grew 14.4%, while unit shipments grew 16.8% to 1.6 million servers. HP led the market with 32.6% revenue share due to strong revenue growth of 13.8% year over year. The fierce competition between Dell and IBM for the second position in the x86 market ended in a statistical tie with IBM and Dell each holding roughly 21% revenue share for the fourth quarter. IBM, however, posted the largest year-over-year revenue growth among the top 5 vendors with 26.1% growth. "Nearly 25% of all x86 servers shipping today include 64-bit support in the form of AMD Opteron and Intel EM64T processors," said John Humphreys, research manager, Modular Server Solutions at IDC. "This trend will boost the use of x86 servers in high performance computing (HPC) technical workloads and in some enterprise workloads that formerly required the use of 64-bit RISC platforms." Additionally, the server blade market continued to impact the market. "For 2004 the blade market nearly doubled in size to over $1.1 billion worldwide," said Jessica Yang, research analyst, Modular Server Solutions at IDC. "Driven by the 'system-ness' of the technology, blade server penetration reached nearly 7% of x86 shipments in the US - meeting IDC's expectation of a market that is building momentum with both early adopters and the mainstream customer base." Renewed Growth in Unix Server Revenue and Unit Shipments Unix server revenues were $5.2 billion in the quarter, increasing 2.7% year over year against a difficult compare for 4Q03. Additionally, on a sequential basis, Unix servers grew dramatically in 4Q04, adding more than $1 billion in quarterly revenue. This sharp growth reflects continued investment in the worldwide installed base of Unix servers, many of which support mission-critical workloads. Importantly, Unix server unit shipments also grew, reflecting additional footprints across all server-class segments. IBM regained the lead in Unix servers worldwide with 36.3% share in terms of factory revenue. HP took the Number 2 spot with 27.6% market share and Sun had 25.3% market share, based on factory revenue. Additionally, both IBM and Sun experienced year-over-year unit shipment growth in 4Q04. Linux Server Growth Accelerates, Topping 60% Year-Over-Year Linux servers generated $1.3 billion in quarterly revenue, representing 9.0% of worldwide server revenue. It was also the second sequential quarter of $1 billion-plus quarterly revenue. Overall, Linux server revenue grew 35.6% year over year, while unit shipments grew 29.1% year over year. HP led the market with 26% revenue share, followed by IBM and Dell with 23.5% and 15.8% share, respectively. "Linux server revenue continues to break new ground," said Jean S. Bozman, research vice president in IDC's Worldwide Server Group. "This reflects increasing adoption of Linux servers for a broader range of workloads, spanning high performance computing and enterprise workloads, including IT infrastructure and Web infrastructure as well as collaborative, decision support, and business processing workloads." Windows Server Market Shows Strong Growth The Windows server market continued to show strong growth, with factory revenues increasing by 15.5% year over year and unit shipments gaining 17.9%. Overall, Windows servers accounted for $4.6 billion in 4Q04, representing 32.0% of quarterly server market revenue. IDC notes that Windows server revenues are vying with Unix server revenues as the largest segments of the worldwide server market when measured by operating system. "This reflects widespread use of Windows servers for a broad range of computing workloads as well as deployment of richly configured Windows servers for mission-critical workloads and an upgrade cycle from Windows 2000 to Windows 2003," added Bozman. Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, Fourth Quarter of 2004 (Revenues are in Millions) Q4 2004 Market Q4 2003 Market Revenue Growth Vendor Revenue Share Revenue Share Q404/Q403 ---------------------------------------------------------------------- IBM $ 5,511 38.2% $ 5,176 37.7% 6.5% Hewlett-Packard $ 3,732 25.9% $ 3,524 25.7% 5.9% Sun Microsystems $ 1,361 9.4% $ 1,414 10.3% -3.7% Dell $ 1,299 9.0% $ 1,173 8.5% 10.8% Fujitsu/Fujitsu Siemens $ 680 4.7% $ 730 5.3% -6.8% Others $ 1,836 12.7% $ 1,701 12.4% 7.9% All Vendors $14,420 100.0% $13,717 100.0% 5.1% IDC's Worldwide Quarterly Server Tracker, February 2005 Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, Full Year 2004 (Revenues are in Millions) 2004 Market 2003 Market Revenue Growth Vendor Revenue Share Revenue Share 2004/2003 ---------------------------------------------------------------------- IBM $16,320 33.3% $14,797 32.1% 10.3% Hewlett-Packard $13,043 26.6% $12,496 27.1% 4.4% Sun Microsystems $ 5,160 10.5% $ 5,369 11.6% -3.9% Dell $ 4,649 9.5% $ 4,172 9.0% 11.4% Fujitsu/Fujitsu Siemens $ 2,884 5.9% $ 2,823 6.1% 2.2% Others $ 6,990 14.3% $ 6,505 14.1% 7.5% All Vendors $49,044 100% $46,161 100% 6.2% IDC's Worldwide Quarterly Server Tracker, February 2005 IDC's Server Taxonomy IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers, midrange enterprise servers and high-end enterprise servers. The revenue data presented in this release is stated as factory revenue for a server system. IDC presents data in factory revenue to determine market share position. Factory revenue represents those dollars recognized by multi-user system and server vendors for ISS and upgrade units sold through direct and indirect channels and includes the following embedded server components: Frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments. IDC's Worldwide Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and factory), segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture. For more information, please contact Hoang Nguyen at 508-935-4718 or hnguyen@idc.com.