Only a Handful of Server Vendors Cheered Their 1999 Revenue Results, IDC Says

FRAMINGHAM, MA – JUNE 21, 2000 – Revenue growth in the server market was mixed in 1999, according to three new Commercial System and Servers bulletins released by IDC. The high-end and midrange server markets posted revenue declines of 7% and 18%, respectively, while the entry server market grew its revenues nearly 13%. Declines can be attributed to a second-half slowdown of production and new product launches due to Y2K uncertainty.

 

"If you sold servers that could significantly interrupt any year 2000 integration or unit testing, then you lost out in 1999," said Vernon Turner, vice president of IDC's Commercial Systems and Servers research. "Likewise, if you provided any Web-hosting server technology, then you hit the sweet spot of the entire market."

The Y2K lockdown affected the high-end market and midrange market much more dramatically than the low midrange and entry server markets. In anticipation of spending slowdowns, many vendors delayed or accelerated product introductions to lessen the impact. Strong demand in 1999 for entry servers was heightened as need arose in ecommerce, Internet, and PC Server desktop migration.

"We expect to see the latter half of 2000 make up for the lackluster start to the year. The top vendors, Compaq, Dell, Hewlett Packard, IBM, are all pushing new models at every tier of the Internet processing architecture in an attempt to make up for the slumber party of '99," Turner said.

The high-end market, which includes servers priced above $1 million, suffered the biggest setback in 1999, with an 18% revenue decrease. The decrease in the high-end server segment was mainly due to Y2K lockdowns on second-half purchases. The instability in the Japanese market also contributed heavily to the waning revenues in 1999. The bright spot in the high-end market was a small group of companies, Sun Microsystems, Fujitsu, and Unisys, which posted revenue and market share gains.

The midrange server market, which includes servers priced from $100,000 to $999,999, decreased overall in 1999 to $16.2 billion in factory revenue. However, the top three vendors — Hewlett-Packard, IBM, and Sun Microsystems — increased market share and revenue for the same time period. "While 1999 was a disappointing year for midrange vendors, a strong turnaround is expected in 2000 although most of the gain will be realized by the market leaders including Hewlett-Packard, Sun Microsystems, IBM, and Compaq Computer," said Lloyd Cohen, director of worldwide market analysis for IDC's Commercial Systems and Servers research.

The entry server market, servers priced less then $100,000, were least impacted by the Y2K slowdown with a strong growth rate of nearly 13% in 1999. The top leaders in this category are Compaq, IBM, Hewlett-Packard, Sun Microsystems, and Dell. Much of the growth in this segment can be attributed to a large demand for dual- and quad-processor standard Intel architecture servers, which grew at 24%.

IDC recently published Entry Server Market Share: 1999 Proves to be a Year of Transition (IDC #B22553) Midrange Server Market Share: 1999 Proves to Be a Difficult Year (IDC #B22300), and High-End Serves Lead the Y2K Decline (IDC #B22238). These reports show revenue and market share in the various worldwide server markets. The reports also analyze vendors' performances, the competitive landscape, and major trends affecting the market. To purchase the reports, contact Patrick Steeves at 1-800-343-4952 ext. 6787 or at psteeves@idc.com.

About IDC

IDC delivers dependable, high-impact insights and advice on the future of ebusiness, the Internet, and technology to help organizations make sound business decisions. IDC forecasts worldwide markets and trends and analyzes business strategies, technologies, and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC provides 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, ebusiness companies, and the financial community. Additional information can be found at http://www.idc.com.

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

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