HP Ties IBM in Server War

New worldwide stats released Friday reveal a real horse race in the computer server sector as HP extracts more good news from the Compaq merger.

by Michael Singer of siliconvalley.internet.com [September 3, 2002]

In the first quarter after its merger with Compaq, HP drew even with perennial market leader IBM with respect to total factory revenue for new servers—with both companies registering a 27.8 percent market share, according to analyst firm, IDC's Worldwide Quarterly Server Tracker program.

"HP is the first company to seriously challenge IBM's number-one market position in the worldwide server market," said Jean Bozman, vice president of Server research at IDC. "The wide breadth of the combined HP and Compaq server offerings allow HP to compete head-to-head with IBM in all major segments of the server market."

Even though HP and IBM are in a statistical tie, HP declined slightly below the overall market year over year and it lost market share relative to the Q2 2001 combined server revenues of the independent HP and Compaq companies.

On a worldwide basis, IDC's quarterly stats said the server market contracted in the second quarter, for the sixth straight quarter. Worldwide server factory revenues declined 16 percent from $12.6 billion in Q2 2001 to $10.5 billion in Q2 2002.

"The overall server market continued its ongoing broad-based decline which has effected almost all major product categories and all geographies," said Mark Melenovsky, director of Server and Infrastructure Hardware programs at IDC. "A weak Japanese and European market in the second quarter offset the U.S. and Asia/Pacific (excluding Japan), which both outperformed our expectations, declining by only 11 percent and 7 percent, respectively. While demand in the second quarter remained soft, we expect the worldwide server market to approach near flat year-on-year growth for the remaining two quarters of the year."

In the server wars, IDC said IBM, Sun Microsystems, and Dell Computer were the only top-tier server vendors that grew server revenues faster than the overall market, with sequential growth rates of 17 percent, 11 percent, and 4 percent, respectively, from Q1 2002, while the overall server market declined 3 percent compared with Q1 2002.

Linux proved a good cash penguin for IBM, which showed strong growth in its Linux business, growing more than 36 percent year over year, with respect to revenue—more than tripling the market growth of 11 percent. The survey said IBM's strong performance was due largely in part to strong marketing efforts of their xSeries and Linux server business lines and high demand for their Linux cluster systems in the United States.

Sun Microsystems maintained its number-one position in the Unix server market with 39 percent market share, followed by HP at 31 percent and IBM at 20 percent.

"Despite the market decline rate of 20 percent year to year in the Unix server market, the top 3 vendors continue to make strong strides in consolidating their shares of the total available market," said Hoang Nguyen, manager of IDC's Worldwide Quarterly Server Tracker program. "Their combined revenues represent nearly 90 percent of the overall Unix market, making it very difficult for smaller vendors to compete in this space."

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