The Four Hundred--Gartner Says Q3 Server Shipments Are Up

Worldwide server shipments were up like a rocket at 20.8 percent growth compared with the third quarter of 2002, with an estimated 1.37 million machines shipped, according to IT analyst firm Gartner. This is the third straight quarter of double-digit server shipment growth compared with 2002, with the second quarter up 17.6 percent, to 1.28 million machines, and the first quarter up 10.4 percent, to 1.23 million units.

Shipments are an interesting indicator of activity in the IT market, but until Gartner's Dataquest unit, which does the counting and estimating, puts revenue figures on the third quarter sales, it is hard to say if all this sales activity is making anyone any money, or signals a rebound in IT spending. Dataquest reckons that 92 percent of servers shipped were X86-based machines, which would imply that companies are increasing their use of low-end, low-cost boxes as these machines get faster and fatter.

Hewlett-Packard, which is vying with IBM for the top spot in the server market (in terms of revenue) every quarter, took the lead in shipments, with 29.7 percent of the market. In the U.S. market, according to Gartner, HP grew shipments faster than the market at large, with a year-to-year shipment growth rate of 28.3 percent and a 9.9 percent sequential growth rate from the second quarter, yielding it 26.6 percent of the U.S. market. Worldwide, the 408,290 servers that HP sold in the third quarter represented an 8.1 percent sequential growth rate from the second quarter, and a growth rate that more or less matched the market at large, with 21.2 percent growth. This suggests that HP is doing worse than other vendors when selling outside of the U.S. market.

IBM, the number-three vendor in terms of shipments, with just over 220,083 machines shipped, could end up being the top vendor when ranked by revenue when Gartner is done with its server model. (Either HP or IBM will be ranked first or second. No other vendor comes close in revenues to these two.) While the iSeries line does not contribute much in terms of shipments (IBM probably shipped between 5,000 and 7,500 iSeries machines in the third quarter), the iSeries line still brings in close to $2 billion a year in revenues and probably half of that goes right to Big Blue's bottom line. To put it bluntly, the iSeries represents about only 3 percent of IBM's sales but 20 percent of its profits. IBM would be happier if it shipped 10,000 or 15,000 iSeries machines each quarter, to be sure. But it can make money at the current ship rate and can offset some of the cut-throat pricing in the Unix and X86 server markets.

In the third quarter, Dell's worldwide shipments were up 28 percent, to 276,350 units, by Gartner's estimates, while IBM's shipments were up an incredible 36.5 percent.

Sun Microsystems, the number-four vendor when ranked by shipments in the quarter, saw a modest 2.9 percent shrink to 59,692 units. This suggests that whatever is going on at Sun has less to do with not shipping servers than with the striking prices of those servers. I have been arguing that people are not abandoning Sun as much as HP, IBM, Dell, and others would have us believe, but rather that they are abandoning the high-cost "Serengeti" Sun Fire midframe and enterprise servers, which use its UltraSparc-III processors, for less expensive V-class UltraSparc-III iron and other low-end machines that use UltraSparc-IIe and UltraSparc-IIIi processors. Sun has not really shipped all that many X86-based machines (under 8,000 in the quarter), so that is only part of the revenue problem at the company.