Asian Server Market Shatters Revenue Records in 1999, IDC Says

FRAMINGHAM, MASS., MARCH 1, 2000 – According to preliminary results released by IDC, the Asia/Pacific (excluding Japan) server market produced record results in 1999, with the market surging past the US$4 billion mark for the first time. In fact, overall server revenues increased 36% in 1999 to reach US$4.67 billion, a total significantly higher than the previous record of US$3.9 billion in 1997.

Market expansion was fueled by sustained economic recovery across the region, increased spending on Internet-related applications, and Y2K-driven spending that continued well into the fourth quarter. Further, the regional server market benefited from positive investment sentiment in the corporate and government segments.

PC servers and entry (small) servers provided the greatest accelerators in 1999 with annual growth rates of 68% and 34%, respectively. Customers reacted positively to the attractive price/performance improvements offered in the entry server category. High-end servers (servers priced above US$1 million) grew marginally with a 3% annual revenue increase and were held back by a Y2K-related slowdown in this market segment. However, Unix-based high-end servers generated substantial revenue growth in 1999 due to the deployment of these servers in Internet and business intelligence environments.

"The continued year-over-year growth in server spending over the past four quarters of 1999 has reaffirmed the strong proliferation of information technology across the different markets and industries in this part of the world," said Avneesh Saxena, manager of server research at IDC Asia/Pacific. "End users have fully realized the strategic advantages of having a robust information infrastructure. Servers will continue to a play a pivotal role in the coming years as markets in Asia/Pacific gear up to the challenges of the new economy."

Competitively, vendor consolidation continued in Asia/Pacific (excluding Japan) with the top five vendors increasing their combined revenue share to 83%, up from 80% in 1998 and 76% in 1997. Strong RS/6000 and PC server growth enabled IBM to maintain its market share in 1999 from 1998, despite a sharp downturn in demand for its proprietary platforms caused by Y2K. Hewlett-Packard was assisted by a strong growth of 99% in its high-end server division and 59% in the PC server arena to grow by 36% overall in value terms and retain its number-two rank. Compaq's server business managed to grow faster than the overall market due to strong demand for high-performance Tandem servers and an improved focus on its Alpha servers. Although the top four vendors maintained their respective market rankings in 1999 from 1998, Sun Microsystems managed to further bridge the gap with Compaq, which ranked third in the market. Sun grew rapidly and gained share due to its aggressive marketing and strong mindshare in the Internet space. With more than a 200% increase in revenues in 1999 from 1998, Dell entered the top five server vendor rankings. Dell's exceptional performance stemmed from its investments and strong performance in the key markets of Australia and the PRC.

Market Highlights

In 1999, all server markets in Asia/Pacific with the exception of New Zealand recorded double-digit revenue growth. The top five markets – Korea, the PRC, Australia, Taiwan, and Singapore, respectively – accounted for 79% of the regional spending on servers. Korea, which was the cornerstone of the regional server market prior to 1997, regained its dominant position with an 81% jump in revenues. Economic recovery, a burgeoning Internet market, and a recovery in the spending of Korean conglomerates contributed to the country's strong rebound. Increased investments in financial services and telecommunications combined with government-led Internet initiatives enabled the Chinese server market to expand 27% annually in 1999. Despite a Y2K-related slowdown in the second half of 1999, server revenues grew 16% in Australia in 1999 over 1998. Investments in Internet applications and infrastructure by the financial services segment and healthy investments by the government supported Singapore's server market expansion in 1999. Although Indonesia was the fastest-growing server market in the APEJ region with 143% growth, it is still significantly smaller than what it was in 1997.

These findings stem from IDC's Asia/Pacific Quarterly PC Server Tracker. To purchase this service, please contact Kristin Williams at 949-442-4008 or by email at kawilliams@idc.com. For more information on IDC Asia/Pacific's research offerings, please contact Beth Freedman or Lisa Bloom at 508-872-8200.

About IDC

IDC delivers dependable, relevant, and high-impact data and insight on information technology to help organizations make sound business and technology decisions. IDC forecasts worldwide IT markets and technology trends and analyzes IT products and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC is committed to providing global research with local content through more than 500 analysts in 43 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, and the financial community. Additional information can be found at http://www.idc.com.

IDC is a division of International Data Group, the world's leading IT media, research, and exposition company.

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