Server Market Posts Growth, Again; Linux Also Rises

The worldwide server market posted growth for the third consecutive quarter at the end of 2003, with Linux use continuing to accelerate, a market research firm said Friday.

Revenue for manufacturers of the beefy computers used to run business applications increased by 11.4 percent to $13.7 billion in the fourth quarter, compared to the same period a year ago, International Data Corp. said. Unit shipments for the quarter jumped a dramatic 22 percent.

The quarter represented the third consecutive period of positive revenue growth and the first time since the economic downturn began in 2001 that sales were up in all major categories of servers, IDC said. A favorable currency exchange rate was a leading factor in the strong quarterly results. With that factor, however, the market still increased by 3 percent.

The major categories of servers include volume servers priced at less than $25,000, midrange enterprise servers, $25,000 to $499,999; and high-end enterprise servers, $500,000 or more.

Volume servers led the market in revenue and unit growth, showing how many companies are choosing to run clusters of the low-cost option to handle some of the most demanding applications."Volume server capabilities are driving into several tiers of the computing infrastructure," IDC analyst Vernon Turner said in a statement. "It shows that high-end server technology has cascaded to this market, and that infrastructure is being augmented by industry standards and IT is reaping the benefits."

For the full year, server revenue increased by 3.2 percent to $45.7 billion, while unit shipments rose 18.3 percent to 5.3 million units.

Servers running Linux, the open-source operating system increasing in popularity in the enterprise, generated $960 million in quarterly revenue. Revenue from Linux servers increased 63.1 percent year-over-year, while unit shipments jumped 52.5 percent.

The increase in unit and revenue for Linux servers indicate that the systems are being used for a wider variety of applications and more powerful configurations are being sold in the market, IDC analyst Jean Bozman said.

"The implication is that the mix of products may be changing somewhat," Bozman said in an interview. "There are more powerful configurations in the product mix, and, as you watch the Linux market develop, it is taking on a greater variety of workloads."Bozman, however, was quick to point out that Linux's main rival Windows also showed strong growth. Revenue from the servers running the Microsoft Corp.-owned operating system rose 16.1 percent year-over-year and unit shipments gained 23.3 percent. Windows servers accounted for $3.9 billion in the fourth quarter, representing 31.7 percent of the server market revenue.

"The Windows market is much bigger than Linux, and it is also growing," Bozman said.

X86 servers, which run on processors built by Intel Corp. and Advanced Micro Devices Inc., generated 15 percent more revenue than a year ago in the fourth quarter to $5.5 billion, approaching the $5.8 billion from RISC-based servers. Unit shipments of x86 servers increased 23 percent to 1.4 million servers.

AMD's traction in the first year shipping its Opteron processor, which supports 32-bit and 64-bit applications, as well as Intel's announcement of 64-bit extensions to its x86 architecture, show that the market is continuing to evolve, IDC said. As a result, the firm expected this year to be a "tipping point" for x86 server adoption, meaning it could surpass RISC servers in revenue.

"Linux server growth continued to accelerate, demonstrating that Linux servers are taking on important roles in IT customers' computing infrastructure," IDC analyst Jean Bozman said in a statement.While Linux continued to make progress, its main rival Windows also showed strong growth. Revenue from the servers running the Microsoft Corp.-owned operating system rose 16.1 percent year-over-year and unit shipments gained 23.3 percent. Windows servers accounted for $3.9 billion in the fourth quarter, representing 31.7 percent of the server market revenue.

X86 servers, which run on processors built by Intel Corp. and Advanced Micro Devices Inc., generated the most revenue worldwide in the fourth quarter at $5.5 billion, 15 percent higher than a year ago. Unit shipments increased 23 percent to 1.4 million servers.

AMD's traction in the first year shipping its Opteron processor, which supports 32-bit and 64-bit applications, as well as Intel's announcement of 64-bit extensions to its x86 architecture, show that the market is continuing to evolve, IDC said. As a result, the firm expected this year to be a "tipping point" for x86 server adoption.

Unix servers overall generated $5.1 billion in quarterly revenue, growing 0.8 percent. It was the first year-over-year growth in 11 quarters. Unit shipments increased by 12.1 percent, compared to the same period a year ago, and were sharply higher than the 4.7 percent growth recorded in the third quarter.

IBM led the Unix server market with a 32.9 percent share in terms of revenue, followed by Hewlett-Packard Co., 30.5 percent; and Sun Microsystems Inc., 27.6 percent. Sun posted an 18.2 percent increase in unit shipments in the quarter, the strongest year-over-year showing among the top 5 vendors.The three vendors held the same positions in the overall server market in the quarter. IBM had 37.9 percent of market share in terms of revenue, increasing revenue by 17.7 percent from the year-ago quarter to $5.2 billion. HP had a 25.8 percent share, 9.4 percent higher than a year ago to $3.5 billion. Sun had a 10.4 percent share, but posted a revenue decline of 1.7 percent to $1.4 billion.

No. 4 Dell Inc. posted a 19 percent increase in revenue for the quarter to $1.2 billion, an 8.6 percent market share; followed by Fujitsu/Fujitsu-Siemens, which posted the strongest revenue growth among the top 5 vendors at 31.3 percent. Fujitsu took in $734 million for a 5.4 percent share.

For the year, the standings remained the same. IBM, Dell and Fujitsu increased market share to 31.6 percent, 9.1 percent and 6.2 percent, respectively. HP and Sun dropped to 27.3 percent and 11.8 percent, respectively. Sun was the only top 5 vendor to post a revenue decline for the year, dropping 11.4 percent to $5.4 billion.