Gartner Says Server Revenue Up in 2003
by Timothy Prickett Morgan
While it's been known for weeks that server shipments climbed steadily in 2003, what was not so obvious was whether the actual money that those server sales generated would grow in the last quarter of 2003 and throughout the full year. As it turns out, at least as far as Gartner analysts can figure, there actually was revenue growth last year. This, perhaps more than any other factor in the IT market, is reason for a small amount (no irrational exuberance, please) of optimism.
According to the latest figures from Gartner, the worldwide server market grew from $44.1 billion in 2002 to $46.1 billion in 2003 across all platform types and sizes of machines. Gartner reckons that IBM put quite a bit of distance between itself and upstart Hewlett-Packard, which bought Compaq to try to get a bigger server business than IBM. So far, IBM is keeping ahead, with $14.8 billion in sales in 2003, up 10 percent over 2002. That gives IBM 32 percent of the server pie, and an increase of two points of market share. There will be plenty of bonuses going around at IBM's Enterprise Systems Group, which has been united with its Technology Group (see "IBM Explains Merged Systems and Technology Groups"). Gartner figures that, for 2003, IBM's sales of Intel-based servers were up 21 percent, to $3.4 billion, and that Unix sales were up 13 percent, to $4.1 billion. Across all platforms, IBM's Linux-related server sales were up 60 percent, to $552 million.
There will be some sighs of relief over at HP, too, thanks to the Gartner numbers. HP managed to grow server revenues in 2003 by 5 percent, to $12.5 billion, matching the market pace that it helps set. A cynic or HP competitor might say that HP kept down the class average, but considering the relatively difficult merger with Compaq, there is no way to look at HP's rebound in sales as proof that it has a handle on that merger. HP gained only two tenths of a point of market share in 2003, rising to 27.2 percent of worldwide sales. The company posted nearly $6.9 billion in sales of Intel-based servers, an increase of 17 percent, giving it a 33.8 percent share of this $20.3 billion market. HP's Unix sales were down 4 percent, to $5.3 billion, but it still had 31.7 percent of that $16.7 billion Unix server market. And across all platforms, HP also saw 60 percent revenue growth on Linux servers, with $927 million in sales. This gave HP a 33.5 percent share of that Linux server market.
Ranked by aggregate revenue, Sun Microsystems was still the number-three vendor by a comfortable margin over number-four Dell, but Sun's sales did decline by 15 percent in the year, to $5.5 billion. Sun lost 2.8 points of market share, which can't make Sun happy. But a lot of this water is under the bridge, and Sun has recognized that it needs to be aggressive in pushing Solaris on X86 platforms and still support its vast Sparc server installed base with enough price/performance improvements to keep them from jumping to alternatives. Sun doesn't really register as an X86 server vendor yet, but it still edged out HP for dominance in 2003, with $5.4 billion in Unix server sales and 32.6 percent of the market. That said, if current trends persist, the Unix market will be a three-horse race this time next year, with HP as the top Unix server maker and Sun and IBM neck and neck for the number-two spot.
Dell was once again the leader in terms of server revenue growth in 2003, pushing sales up 22 percent, to just under $4 billion for the full year. Dell gained six tenths of a point of market share in the X86 server market, with 19.6 percent of that pie. The company only managed to grow Linux sales by 40 percent, according to Gartner's estimates, to $521 million for all of 2003. However, that gave Dell an 18.8 percent share of the Linux server pie, which is roughly its share in the overall X86 server space. Interestingly, the Linux server market outside of sales by IBM, HP, and Dell is growing sales by 90 percent year-on-year, with $766 million in sales in 2003. The relative newness of the Linux server market and the enthusiasm of Linux on various special-purpose servers show that there is room for players besides the majors in the Linux space--at least for now, anyway.
There is, of course, only one OS/400 server maker, and that is IBM. While Gartner did not break out OS/400 server sales in its report for 2003 sales, I have been building my own market model. As best as I can figure, IBM sold $1.78 billion in iSeries and AS/400 hardware (processors and internal storage) in 2003, up 8 percent. The company pushed another few hundred million dollars in OS/400 and DB2/400 licenses. I figure that IBM shipped about 27,000 new systems in 2003 and actually saw the installed base climb a bit, for the first time in since it peaked in 1998.