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Analysis: Server Sales Are In Growth Position

If what goes up must come down, then you have to wonder if the converse is true. Will what goes down always come up? Well, not really, but in the server market, that seems to be the case. And the results of International Data Corp.'s recent server market survey bear that out.

Server sales, according to the market research firm, showed a year-over year growth in the fourth quarter of 2003 of 11.4 percent, as we reported earlier. That's the best growth that we've seen in a long time. It was the third consecutive quarter of growth (the last two saw 0.2 and 2 percent, respectively). And considering that the market has been in a slump pretty much since the end of the .com boom, it looks like an even better sign. But these results were predictable, and were, in fact, not as good as one would surmise from just a quick look at the numbers.

To see what's going on, note that much of the increase in dollar sales was due to currency fluctuations, according to Lloyd Cohen, director of research for IDC. The dollar has fallen with respect to foreign currencies of late. That means it takes more dollars to equal a given amount of a foreign currency -- Euros, Yen or whatever. So when a server is sold and paid for in Euros, and that revenue is converted to dollars, the result is more dollars than would be the case if the dollar were higher. Thus, while the server revenue numbers in the last quarter of 2003 increased 11.4 per cent, to $13.7 billion, the increase with the currency fluctuations backed out is only 3 per cent.

That number sounds relatively anemic. However, it reflects the third straight quarter with growth in the server market, following nine straight quarters without growth. So, although the 3 percent is relatively small, it's still a good sign.

"We didn't call this a rebound," said Jean Bozman, research vice president at IDC, "but it does show growth."

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