SCIENCE

SAN JOSE, CA -- The worldwide workstation market continued to shrink drastically in the second quarter of 2001 as worldwide shipments declined 15 percent over the second quarter of 2000, according to preliminary results from Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB). This was the third consecutive quarter of a shipment decline for the workstation industry. While the soft U.S. economy has impacted global workstation sales, analysts said this is not the only reason the workstation industry is declining. "The decline in workstation sales has its roots in a market reality check following recent years' unnaturally high growth, especially in the entry-level IT workstation segment. Endless demand for branded workstations just doesn't exist in the market," said Pia Rieppo, principal analyst covering workstations for Gartner Dataquest's Computing Platform Worldwide group. Dell was the only top-tier vendor to experience double-digit growth in the second quarter (see Table 1). IBM was the only other top-tier vendor, besides Dell, to increase its market share in the quarter. "While Dell had the highest growth in the quarter, for Dell the result is relatively poor since it halved its growth rate from the past few quarters," Rieppo said. "IBM did relatively well after the overhaul of the low-end systems pricing, but IBM faces potential disruption and momentum changes in the third quarter, as the workstation division will be moved to the enterprise servers division. HP lost share as it dealt with the reorganization of all workstations into a single product line up and changes in channel strategy." The second quarter of 2001 saw the introduction of Itanium-based workstations. Despite high expectations, shipment volumes were negligible in the second quarter with the exception of HP, the codeveloper of Itanium's EPIC architecture. "High-end workstation users that will most benefit from Itanium tend to be conservative and will likely wait for the platform and applications to mature," Rieppo said. "Therefore, we believe that Itanium-based workstations will likely remain a development platform until the next generation processor arrives next year." While vendors have had to deal with organizational changes and the economy, Gartner Dataquest analysts said another challenge is that many end users feel the value proposition of low-end workstations differs little from that of PCs. "Many workstation end users run low-end applications that may not benefit from workstation-class service and support, graphics cards or system scalability. The introduction of new technologies, such as Pentium 4 and Xeon, has not boosted the market," Rieppo said. "Some of the system vendors said that workstations target professional markets, whereby the application certification and workstation support have true value. In any case, 2001 will be a trying year for workstation vendors." For more information visit www.gartner.com