Server market goes mad for Linux

The server market is growing in the US - but not for everyone.

IBM and Dell each saw server revenue grow by more than 20 per cent in the first quarter compared with the same period a year ago, according to researcher Gartner.

The "other" category, made up of second-tier manufacturers, also did well, experiencing year-over-year revenue growth of 25.3 per cent for the overall market and 71.9 per cent for the Linux market - faster than the market as a whole. In most categories, the "other" group generally saw faster growth than nearly all the brand-name manufacturers.

Sun and HP, meanwhile, experienced annual revenue declines of, respectively, 16.7 per cent and 13.2 per cent. Overall, US server revenue grew by seven per cent during the quarter, according to Gartner.

Sun, in fact, got passed by Dell in overall market share as measured by revenue and dropped to number four in the market. In the fourth quarter, Sun accounted for 13.4 per cent of the server dollars spent in the US and Dell accounted for 13 per cent. In the first quarter, Sun's share declined to 11.6 per cent while Dell's increased to 14.8 per cent.

IBM remained the clear leader in servers overall in terms of revenue, according to Gartner. IBM's total US server revenue came to $1.49bn, an increase of 21.8 per cent from the same period a year ago. In terms of the overall share of US server revenue for the period, IBM's rose to 33.4 per cent, a 4.1 per cent increase over its revenue market share of 29.3 per cent in the first quarter of 2003.

In Unix, IBM sold $461m worth of Unix servers to account for 33.6 per cent of Unix server dollars spent in the US, up 9.1 percentage points from its market share of 23 per cent a year ago.

IBM also saw revenue from Intel servers climb 37.2 per cent to $322m. Big Blue is actually smaller than both HP and Dell in this market by a wide margin but grew faster than both. Dell saw its revenue increase to $662m, up 24.2 per cent from a year ago. HP, meanwhile, saw revenue grow by 11 per cent to $738m. Still, the overall market grew by 24.5 per cent, so both HP and Dell gave up some market share to IBM and second-tier manufacturers.

Number two HP pulled in $1bn in server revenue for the quarter. Its overall market share declined from 28.1 per cent to 22.8 per cent, a 5.3 per cent decline.

Still, HP scored a victory in Linux during the quarter. Revenue generated by Linux servers grew by 48 per cent from a year ago to hit $234m. HP is now just behind IBM, which saw Linux server revenue increase by 19.9 per cent to $260m. IBM, though, grew slower than the market, which meant that it gave up 5.2 points of market share while HP gained 1.7 per cent in the Linux market as measured by revenue.

In terms of market share, Dell commanded 14.8 per cent of all server dollars spent, two per cent above its 12.8 per cent in the same period a year before.

Dell was also the only large company that saw server revenue increase from the fourth quarter to the traditionally slower first quarter. Revenue grew 3.8 per cent from the fourth to the first quarter. IBM saw sequential revenue decline by 7.3 per cent, although its market share actually grew because both revenue at Sun and HP declined in double digits. Overall, the market grew slightly, sequentially.

Michael Kanellos writes for CNET News.com