SCIENCE

FRAMINGHAM, Mass.- The server systems market declined 3.6% in the first quarter of 2003 to $10.5 billion in terms of factory revenue compared with the same quarter a year ago, according to IDC's Worldwide Quarterly Server Tracker. The sequential quarterly decline was less than the 5% year-over-year decline that was shown in 4Q02, indicating a continued trend toward stabilization in overall market spending. The slight decline was in line with IDC expectations for 1Q03 factory revenue. The overall market was buoyed by strong sales in the volume server segment (servers priced less than $25,000), which grew nearly 10% year-over-year in terms of factory revenue. Meanwhile, overall server market unit shipments grew by 11.5% year-over-year. IDC believes that this strength in volume server sales reflects continued IT interest in buying low-cost servers to add incremental capacity to their existing computing infrastructure. "The continued strength in the volume server space shows that the IT marketplace is still adding capacity, but it is doing so with low-cost, rack- optimized servers that fit within today's restricted IT budgets," said Vernon Turner, group vice president of Global Enterprise Server Solutions at IDC. "Worldwide server sales in the first quarter were in step with traditional seasonality, following a stronger fourth quarter. But they also reflect new buying patterns for server systems that have emerged during the economic downturn of 2001-2002." In the first quarter, HP took the number 1 spot in the worldwide server systems market with 27.9% revenue share, leading IBM, the traditional server market-share leader, by 2.4 points of share. Sun Microsystems and Dell remain the number 3 and number 4 server vendors worldwide, respectively, followed by Fujitsu in the number 5 spot. Dell posted particularly strong revenue growth of 15.1% year-over-year. Top 5 Vendors, Worldwide Server Systems Factory Revenue, First Quarter 2003 (Revenues are in Millions) Q1 2002 Market Q1 2003 Market Revenue Revenue Share Revenue Share Growth 2003/2002 Vendor Hewlett- Packard $3,325 30.4% $2,937 27.9% -11.7% IBM $2,511 23.0% $2,684 25.5% 6.9% Sun Microsystems $1,589 14.5% $1,346 12.8% -15.3% Dell $856 7.8% $985 9.3% 15.1% Fujitsu $573 5.2% $560 5.3% -2.2% Others $2,075 19.0% $2,028 19.2% -2.3% All Vendors $10,929 100.0% $10,541 100.0% -3.6% NOTE: Data for Hewlett-Packard includes revenue for both Hewlett-Packard and Compaq. In the highly consolidated UNIX server market, the competition continued to be fierce during the quarter. HP and Sun tied for the number 1 position in 1Q03 separated by 0.2 point of market share. IBM rounded the top three vendors, gaining 5 points of market share year-over-year. The UNIX market declined 12.9% to $4.3 billion from the year-ago quarter, stemming from declining average sales prices, especially for midrange and high-end enterprise Unix server systems. "The intense price competition between the top three Unix server vendors continues to make the number 1 position in the Unix server market -- including Unix servers based on RISC and on x86 architectures -- difficult to predict," said Jean S. Bozman, research vice president of Global Enterprise Server Solutions at IDC. "This quarter, HP appears to have leveraged its merger with Compaq to pull even with Sun for leadership of the worldwide Unix server market. However, IDC expects that the leading vendors will continue to compete for market leadership in coming quarters." The Linux server market was, once again, the brightest spot in the worldwide server market during the first quarter, posting 35% increase to $583 million from the year-ago quarter. "Unit growth and factory revenue in the Linux market continue to climb, driven by increasing functionality for Linux server hardware and software and by intense competition between all the major server vendors," said Bozman. "While HP continues to lead the Linux market, Dell and IBM are working hard to post market-share gains in the Linux server market." The Windows server market -- the largest single segment by unit shipments worldwide -- grew nearly 10% in 1Q03 in terms of factory revenue, compared to 1Q02. All major server vendors except for Sun ship Windows servers, which accounted for $3.2 billion of the total sever systems market revenue during 1Q03. IDC data in recent quarters shows modest but steady growth in the Windows server segment, based on a large number of shipments each quarter. Revised Server Taxonomy IDC has instituted a new Server Taxonomy during 1Q03, which maps the eleven price bands within the server market into new prices ranges. Specifically: * The category "Volume Servers," formerly called "Entry Servers," is based on IDC's price bands under $25,000. * The category of Midrange servers has been changed to "Midrange Enterprise Servers," and it will be based on IDC's price bands between $25,000 to $500K. * The category of High-end servers has been changed to "High-End Enterprise Servers," and it will be based on IDC's price bands greater than $500K. * Previously, IDC had defined entry servers as servers that were priced less than $100,000; midrange servers as those that were priced from $100,000 to $999,999; and high-end servers as those that were priced at $1 million, or more. * The changes were made to reflect declining average sales prices for the traditional categories of servers, and to reflect the new pricing models for these server types. * IDC defines a server system as a general-purpose multi-user computer. It is a piece of hardware which allows the attachment of multiple client devices and allows shared applications to be run. It is a product specifically marketed as a server system. * Servers are tracked with the average cost of the followings components: Frame or cabinet and all cables, Processors, Memory, Communications boards, Operating system, Other bundled software only in AS/400, 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.