First growth in server revenues for two years

27 Nov 2003

Annual factory revenue from the shipments of servers showed the first positive growth in nine quarters recently with a 5.5pc year-over-year increase in revenues in the third quarter of US$2.9bn.

With 20.1pc annual growth, unit shipments continued to grow and maintained the trend displayed in the first two quarters of 2003. Total unit volumes shipped reached 312,325 during the third quarter of 2003.

x86 (Windows and Intel-based server systems) volume remained the driving force beind the strong double-digit server market increase, growing 23.3pc from third quarter last year to the third quarter this year. EPIC servers (mid- to large-scale systems manufactured by players like Sun, IBM and HP) also grew in unit terms and more than doubled in revenues achieved, though the share of the Intel 64-bit architecture remained small in the overall market.

“We are beginning to see green shoots in the industry,” said Thomas Meyer, director of IDC’s Server Group. “Some industry sectors, such as telecommunications and finance, which have been quiet in recent times, are beginning to come back. Similarly, there is renewed activity in the large project sector. However, sales cycles remain lengthy and the cost focus means that prices continue to be under pressure for simple box as well as solution sales.”

Nathaniel Martinez, senior analyst in IDC’s European Server Group, added: “The midrange enterprise market segment has been very slow over the last two years, but for the second consecutive quarter showed an upturn in revenue growth. In third quarter, the Unix RISC midrange enterprise market saw revenues increase by 24.7pc.”

The small and medium-sized business segments were again the main accelerators of unit shipment sales. Price pressure and more product launches into this market meant that average system prices dropped again – compared to the third quarter last year, the average price fell 12pc.

In terms of individual vendors IBM topped the pack in terms of dollar revenues from units shipped in the third quarter, generating growth of 16.1pc to reach US$927m. HP managed to lead in terms of unit sales and despite a small annual decline in revenues, the company closed the cap on IBM to 1.2pc revenue share points. Sun retained its third place position, but is increasingly under pressure from fourth-ranked Fujitsu Siemens, which has been performing consistently. With just over 31pc growth in unit shipments, Dell performed very strongly during the quarter with its PowerEdge systems, but price dynamics in this market meant that Dell could only extend its revenue share marginally.

By John Kennedy