INDUSTRY

FRAMINGHAM, Mass. -- According to IDC's Worldwide Quarterly Server Forecast, spending for servers is on the upswing in the U.S. IDC expects the U.S. server market to recover to $18.2 billion in 2003, or about 3% year-on-year growth over 2002. This will be the first year since 2000 that spending in the U.S. server market has increased. Emerging markets in Asia/Pacific (excluding Japan) and Central and Eastern Europe are also expected to achieve positive growth over last year. Worldwide, spending for servers is expected to be flat at $49 billion in 2003 with sluggish enterprise IT markets in Japan, Western Europe, and Latin America conspiring to inhibit a broader worldwide recovery. Leading the market recovery in the U.S. has been x86-based (Intel and AMD) servers running either Linux or Windows operating systems. In 2003, the worldwide Linux server market is expected to grow 34% over the previous year to $3.1 billion and the Windows server market is expected to grow 8% to $15.0 billion. Customer migration to these platforms to handle IT infrastructure workloads, to meet server demand in small and medium businesses, and in the technical and high performance computing market will drive much of this growth. "As the market finds its feet, demand has shifted to new classes of products and vendors are positioning themselves accordingly," said Mark Melenovsky, director, IDC Server Research. "Customers are betting IT dollars on a number of new platforms and architectures to prepare themselves to compete in a more Web-enabled marketplace. Notable among these products are Linux and Microsoft server platforms, x86 processor-based systems, and more modular computing architectures in the form of rack-optimized servers and server blades." Server blades are on the cusp of tremendous growth in the market. While they represented only about 3% of the server unit shipments in 2Q03 with sales of 41,000 blades, IDC expects more than 2.2 million blades to ship worldwide by 2007, or about 27% of all new servers sold. In contrast to the Windows and Linux server market, the UNIX server market has declined more than $12 billion -- or about two fifths of its value -- between 2000 and 2002. "The hemorrhaging in the UNIX server market is largely behind us," said Steve Josselyn, research director, Global Enterprise Server Solutions. "While spending for UNIX-based servers is not expected to grow over the course of the next five years, we expect enterprise customer demand to sustain this market for the near term." In a longer term view, IDC forecasts the worldwide server market will achieve a compound annual growth rate (CAGR) of 2.8% over the next five years, representing a $56.6 billion opportunity in 2007. Driven by smaller form factors and more incremental infrastructure capacity, server units are expected to achieve a CAGR of 12.7%, reaching 8.1 million new server sales in 2007. IDC's Worldwide Quarterly Server Forecast is a quantitative tool for analyzing the future global server market on a quarterly basis. The forecast includes quarterly shipments (both ISS and upgrades) and customer revenues segmented by region, operating system, price band, CPU type, form factor, and CPU capacity.