Entry Server Market Growth Held Back in 1998, According to IDC

Framingham, MA, January 18, 1999 — A newly released bulletin from International Data Corporation (IDC) entitled 1998 Entry Server Year in Review: Market Stalls estimates a worldwide decline of 2% in Entry Server factory revenues from 1997 to 1998. The decline marks the first time in many years that the market did not reach double digit revenue growth. The market now totals $25.1 billion, down from $25.6 billion in 1997.

Susan Frankle, Program Director for IDC's Commercial Systems and Servers group, says, "Factors that contributed to the overall revenue decline include decreasing average server values, a shift in product mix to low-end Intel and RISC servers, weak sales in Japan and high channel inventory levels." She adds, "However, companies like Dell and Sun managed to escape the negative impact with effective pricing, innovative distribution strategies and targeted ISP campaigns that capitalized on the Internet phenomena."

Vendor Positioning

· IBM is in the number one spot with 21% market share. IBM posted 4% year-over-year revenue growth for $5.2 billion in worldwide factory revenues.

· Compaq is the number two supplier of Entry Servers with 18% market share, garnering 11% annual revenue growth and $4.5 billion in worldwide factory revenues.

· HP holds onto third place with 12% market share, despite a 3% decline in revenue growth from a year ago. HP posted $3.1 billion in worldwide factory revenues.

· With a mammoth jump of 16% in market share over last year, Sun takes the fourth spot with 11% share in 1998. The company's UE 450 and newly announced 5S and 10S servers did extremely well. Sun posted worldwide factory revenues nearing the $2.7 billion mark.

· At number five, Dell had an especially impressive year, growing factory revenues from $941 million in 1997 to $1.7 billion in 1998, which represents 76% annual revenue growth. Dell jumped to 7% market share in 1998.

Despite slowed growth in 1998, IDC believes there are several positive influences that will grow the market more favorably looking ahead. The rising adoption of collaborative workloads will lend itself to a boom in sales in the Entry Server space. Internet server sales are accelerating at a rapid pace, especially within small and medium-sized ISPs, enabling future growth within the Entry Server segment. Additionally, IDC estimates that NT grew 22% in the Entry Server segment, while most other operating systems experienced a decrease in worldwide factory revenues. IDC expects that the competitive presence of White Box/reseller servers within small business accounts will drive down prices on low-end servers from the branded vendors.

Data included in this IDC report (#B18051), 1998 Entry Server Year-In-Review: Market Stalls, was sourced from IDC's Worldwide Quarterly Server Tracker. To purchase the report, call Cheryl Toffel at 1-800-343-4952, ext. 4389. IDC's Web site (http://www.idc.com) contains additional company information, recent news releases, and offers full-text searching of the latest available research.

About IDC

International Data Corporation is the information technology industry's most comprehensive resource on worldwide IT markets, trends, products, vendors, and geographies. IDC provides data, analysis and advisory services to the world's leading IT suppliers as well as IS professionals in finance, insurance, entertainment, advertising, consumer goods and publishing. IDC's research and opinions are based on the results of more than 300,000 end-user surveys, in-depth competitive analysis, broad technology coverage, and strategic analysis. IDC is committed to providing global research with local content through its 500 analysts in more than 40 countries worldwide. Additional information on IDC can be found on its Web site 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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