IBM trounces Sun in server sales

IBM has extended its lead in the server market, stealing a sizable slice of worldwide sales for the powerful computers away from Sun Microsystems, a new study shows. Sales of IBM servers increased 10.1 per cent to $3.2bn in the second quarter of 2003, giving Big Blue 30.4 per cent of the $10.6bn market, according to new figures released by IDC. Third-ranked Sun Microsystems, meanwhile, saw revenue fall 18.7 per cent to $1.4bn. The 2002 merger with Compaq wasn't enough to put second-place Hewlett-Packard ahead of IBM, but the company did increase server sales a slight 0.4 per cent to $2.9bn, IDC said. Fourth-ranked Dell increased sales 10 per cent to $980m. The numbers indicate that IBM, which Sun had trounced in the late 1990s, is now well along its road to recovery.

Sun's second calendar quarter is usually strong because it is the final quarter of the company's fiscal year, but in 2003 Sun deliberately refrained from sales incentives that it feared could pull in sales from the next quarter, a problem that occurred in 2002. Selling servers has been a punishing business since customers stopped buying them willy-nilly in the late 1990s. The market for the systems, used for networked data processing and storage tasks such as supermarket sales and or online banking, dried up after the internet mania subsided and the recession hit.

IDC predicted in May that server sales would be flat from 2002 to 2003 then grow from there, but even the $58bn IDC expects customers to spend on servers in 2007 will be less than the $70bn they spent in 2000. Server sales in the second quarter didn't shrink this time around, though the 0.2 per cent growth was hardly torrid. Sun focuses chiefly on servers running the Unix operating system, a line that was particularly popular in the internet go-go years, and the company remains tops in that segment with 33 per cent of the $4.33bn market. But Sun's 19.1 per cent drop in sales to $1.43bn meant it lost 5.7 percentage points compared with the same quarter of 2002, while third-placed IBM's 20.4 per cent revenue growth to $1.06bn meant it gained 5.2 per cent to reach 24.6 per cent of the market. Second-placed HP saw its Unix server sales dropped 3.6 per cent to $1.36bn. Unix servers historically have accounted for the largest single fraction of the server market. Now servers based on Intel processors are a larger market, according to IDC. In the second quarter, the market for servers based on Intel processors grew 10.7 per cent to $4.46bn, while the Unix server market dropped 5.2 per cent to $4.33bn. The top Intel server seller remains HP, with 33.1 per cent of the market, but it and second-placed Dell lost share to IBM. IBM's Intel server revenue grew 23 per cent to $778mn, while HP's grew 9.2 per cent to $1.48bn and Dell's grew 10 per cent to $980m. Sales of servers using the Linux operating system increased 40 per cent to $650m, with HP holding 28.9 per cent of that market, Dell at 20.5 per cent and IBM at 19.4 per cent, IDC said. "Blade" servers, a newer server idea in which several thin servers share the space and hardware resources of a larger chassis, grew 693 percent from a small base to reach $119m. HP led the market with 31.9 per cent share, but lost ground over 2002 to new arrivals IBM, with 26.9 per cent, and Dell, with 15.1 per cent of the market.

Stephen Shankland writes for CNET News.com