Server Shipments Up 24 Percent

Server sales revenues worldwide increased about 8 percent in the second quarter of 2004 over the same period last year, a Gartner analyst said Wednesday, while the number of systems shipped grew three times as much.

"Every region showed positive year-to-year growth in revenue," said Mike McLaughlin, a Gartner principal analyst. Globally, server revenues topped $11.5 billion for the quarter.

Long-time leader IBM retained its number one spot in revenues, accounting for $3.5 billion in sales and a 30.7 percent share of the dollar-based market. HP, meanwhile, sold almost $3.2 billion worth of systems.

The fastest-growing seller, in revenue terms, was Dell, which pumped up sales by over 20 percent from the same quarter in 2003.

As in the past, the trend is toward less expensive servers. The growth rate of servers shipped in the second quarter greatly outpaced the increase in revenues. Overall, revenues increased only 7.7 percent while shipments climbed 24.5 percent.Hewlett-Packard is the top dog in systems shipped with 463,000; machines with its nameplate accounted for 28.9 percent of the servers which left the factory, while revenue leader IBM came in third, at 14.9 percent. Dell is the number two seller.

The biggest winner of the quarter, however, was number four Sun, which grew its server shipments by 38.4 percent over 2003 (but grew its revenues only 2.9 percent). "Sun has had problems -- it's still reeling from a lot of the decisions made in the dot.com days -- but it had a great quarter," said McLaughlin. He pointed to Sun's success with its Netra line in the telecommunications market, and inroads into the financial space with high-end system, as the drivers for Sun's success.

IBM's third-place ranking in servers shipped -- it put an estimated 239,000 machines in companies during the second quarter -- was a sign of only temporary weakness, said McLaughlin. "IBM didn't have a good quarter because people were waiting for the Power 5 lines," he said, referring to the new processor which debuted in May.

"We should see a lot of sales from IBM in the next couple of quarters," McLaughlin added, because of the demand for P5-based servers and other technologies-- particularly it's virtualization engine that lets users slice and dice each physical processor into as many as 10 "virtual" machines -- start showing up in the sales column.

"Absolutely, IBM has a leg up here," said McLaughlin.Among the trends McLaughlin spotted in his data is a huge increase in the sales of servers based on x86-64 processors like Intel's Itanium and AMD's Opteron. The 64-bit processor server market grew by an astounding 2,183 percent year-to-year. "This is going to be an interesting competition to watch," said McLaughlin.

Servers based on 32-bit x86 CPUs, however, remain the biggest sellers, and accounted for almost half of the quarter's revenues.

Ditto for Windows, the most popular server operating system. More than 34 percent of all systems run Windows, while Linux accounted for just under 10 percent.

Gartner rolls out server sales -- revenues and units shipped -- each quarter.