HEALTH

According to IDC's Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market grew at 5.5% year over year to $11.5 billion in the third quarter of 2004, marking the sixth consecutive quarter of positive overall revenue growth. Volume server revenue grew 18.2% year over year and continues to represent the primary growth engine for the server market overall. Revenue for midrange enterprise servers declined 10.2% year over year marking the third consecutive quarterly decline as traditional midrange workloads continue to migrate to volume systems. Buoyed by renewed enterprise spending, the high-end enterprise server market grew 1.9% year over year, its forth consecutive quarter of positive revenue growth. "IT spending remained strong overall in the third quarter as customers continued to refresh and expand their IT infrastructures," said Matt Eastwood, program director of Global Enterprise Server Solutions at IDC. "Although customers continue to target data center simplification initiatives, investment in strategic IT initiatives - including new workloads - are also growing significantly once again." Top Server Market Findings -- Strong year-over-year unit shipment growth of 18.7%, reflecting strong unit growth in the volume server segment. -- Linux servers posted their ninth consecutive quarter of double-digit growth with year-over-year revenue growth of 42.6% and unit shipments up 31.7%. This was slightly slower than the 1Q04 revenue growth rate of 48.1% and 1Q04 unit growth of 38.0%. -- Microsoft Windows servers, based on x86 server hardware, showed strong growth, as revenues grew 13.3% and unit shipments grew 19.1% year over year. Quarterly revenue of $3.9 billion for Windows servers represented 33.9% of overall quarterly factory revenue, essentially equal in size to the Unix market. -- Unix servers experienced 8.3% unit growth year over year and a 2.3% revenue decline over 3Q03 with total Unix revenues of $4.0 billion for the quarter. Overall Server Market Standings, by Vendor -- IBM held on to its number 1 spot in the worldwide server systems market with 31.7% market share in factory revenue while growing factory revenue by 6.3% compared to 3Q03. -- In terms of unit shipments, HP was the number 1 vendor worldwide. HP maintained the number 2 spot in terms of factory revenue with 26.8% share, growing revenue 2.9% compared to 3Q03. -- Sun and Dell tied for third place in factory revenue with 10.2% and 10.1% share respectively. Dell experienced strong 14.1% year-over-year revenue growth while Sun's revenues were flat, growing 0.1% when compared to 3Q03. x86 Industry Standard Server Market Dynamics The x86 server market dynamics continued to be strong. Factory revenue grew 14.2% to more than $5.4 billion worldwide - exceeding the revenue generated by RISC-based servers worldwide for the third consecutive quarter. Unit shipments grew 18.3% to more than 1.4 million servers worldwide. IBM and Dell both outpaced the category's growth rate, posting year-over-year unit shipment growth of 26.0% and 25.5%, respectively. The third quarter was marked by an acceleration in the x86-64 servers ramp in volume. "The introduction and the beginning of a transition to systems based on Xeon EM64T helped drive EM64T based processors into nearly 60,000 units worldwide," said John Humphreys, research manager of IDC's Global Enterprise Server Solutions. "At the same time, Opteron grew volumes greater than 400% year over year." "It is interesting to note the different markets these products are serving," Humphreys added. Opteron is largely selling into corporate, government and industrial market segments with a need for high performance systems - hence over 60% of AMD's volumes are tied to Linux server deployments. Conversely, EM64T is shipping overwhelmingly with Windows and is being deployed largely in existing 32-bit environments." Linux Servers Surpass the $1 Billion Mark in Quarterly Revenue Linux server revenues surpassed $1 billion in quarterly factory revenue for the first time in 3Q04. Linux server revenues showed 42.6% growth, while unit shipments grew 31.7%, reaching 9.2% of overall quarterly server revenue. Worldwide investment in Linux servers for both technical and commercial workloads remains strong as the platform continues to expand its presence in data centers around the world. HP maintained its number 1 spot in the Linux server market, with 26.9% market share in terms of revenue, while IBM was second with 20.5%. Dell maintained the third spot with 17.4% of Linux server spending. Bladed Server Market Shows Strong Shipment and Revenue Growth The server blade market showed continued growth in the quarter, with shipments increasing by 44.0% year over year and factory revenue gaining 22.5% sequentially. Overall, bladed servers accounted for $287 million in the third quarter, representing 2.5% of quarterly server market revenue. IBM maintained the number 1 spot in the server blade market, with 44.2% market share "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. Richer user configurations also contributed to the continued growth in this segment of the market," said Jessica Yang, research analyst of IDC's Global Enterprise Server Solutions. "As more small and medium-sized businesses begin to adopt blades and with Dell re-entering the market, blade servers are on pace to surpass a billion dollars in revenue worldwide in 2004." -0- *T Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, Third Quarter of 2004 (Revenues are in Millions) Revenue Q3 2004 Market Q3 2003 Market Growth Vendor Revenue Share Revenue Share 3Q04/3Q03 IBM $3,659 31.7% $3,441 31.4% 6.3% Hewlett-Packard $3,094 26.8% $3,006 27.5% 2.9% Sun Microsystems $1,176 10.2% $1,175 10.7% 0.1% Dell $1,170 10.1% $1,025 9.4% 14.1% Fujitsu/Fujitsu Siemens $714 6.2% $684 6.3% 4.4% Others $1,733 15.0% $1,611 14.7% 7.6% All Vendors $11,547 100.0% $10,943 100.0% 5.5% IDC's Worldwide Quarterly Server Tracker, November 2004 *T IDC's Server Taxonomy IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers (servers priced less than $25,000), midrange enterprise servers ($25,000 to $499,999), and high-end enterprise servers ($500,000 or more). 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.