Worldwide Midrange Server Revenues Shrink 10% in 1999, According to IDC

FRAMINGHAM, MASS., FEBRUARY 23, 2000 — Revenues in the worldwide midrange server market took a dive in 1999, dropping 10% from $17.6 million in 1998 to just under $15.9 million. However, the market is expected to rebound slightly during 2000, according to a new IDC bulletin, 1999 Midrange Server Year in Review: It's Not Just About Y2K. IDC classifies servers priced from $100,000 to $1 million as midrange.

"A number of factors conspired to cause revenues in the worldwide midrange server market to contract during 1999," said Lloyd Cohen, director of worldwide market analysis within IDC's Commercial Systems and Servers research program. "These factors included Y2K-related computer lock downs at large corporate sites, pricing pressure, product transitions, weakening sales of IBM midrange servers, and declining sales by second-tier vendors. However, the market is poised for growth – albeit small – provided that the U.S. and European economies remain strong, the Japanese economy continues to rebound, and demand for midrange servers used as Internet engines continues unabated."

In 1999, the top two vendors in the market, IBM and Hewlett-Packard, experienced 12% and 5% losses, respectively. Both were hampered by aging products, but have taken steps to correct the problem by introducing new products.

The number three and four vendors, Sun Microsystems and Compaq, meanwhile, bucked the market's downward trend. Sun's revenues increased 24% while Compaq's grew almost 18%. "One of Sun's greatest strengths is the fact that its product line was stable and focused – maybe even enhanced – during 1999," said Jean Bozman, director for IDC's Commercial Systems and Servers research program. Sun recently introduced a financial division, Sun Microsystems Finance. "Sun can use its financial group as a weapon against its chief server competitors, IBM, HP, and Compaq, all of which have significant financial arms that encourage corporate purchases of large server equipment," Bozman added.

IDC is optimistic the worldwide midrange server market will recover in 2000. One of the reasons for the optimism is increasing demand for back-end midrange Internet servers, which act as database-hosting, centralized servers that support hundreds of end users accessing Internet or ecommerce applications in addition to traditional business applications. "The pull from end users accessing the Internet will boost midrange server growth in the mega-datacenters being built by ecommerce sites, Internet service providers, and application service providers," Cohen said. Another factor for optimism regarding renewed midrange server growth is the trend toward server consolidation.

IDC's new report, 1999 Midrange Server Year in Review: It's Not Just About Y2K (IDC #B21280) reviews the midrange server market performance in 1999. It shows vendors 1997-1999 revenues for the midrange server market as well as for the overall server market. Additionally, the report discusses individual vendor performances and market trends. To order a copy, contact Patrick Steeves at 1-800-343-4952, ext. 6787 or at psteeves@idc.com.

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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