The worldwide PC server market is posting healthy growth rates for the third quarter of 1998, with year-over-year growth of 22 per cent and sequential growth of 14 per cent, according to market researcher International Data Corp (IDC)However, while third quarter worldwide shipments climbed to a healthy 551,000 units, revenue earned by PC server vendors was not as stellar, as most purchases in the quarter were of low-end systems, said analyst Amir Ahari, with IDC's Commercial Systems and Server program.
IDC attributes the slow sales of high-end systems, that are sold at higher profit margins, in part to the lack of processors capable of supporting servers with four chips, Ahari said. Only Intel's Pentium Pro processor, which is almost obsolete, and the company's Pentium II Xeon chips, are supporting four-way systems.
"There aren't enough Xeons to go around," Ahari said, adding that he expects server sales to further improve in the traditionally strong fourth quarter. In fact, IDC predicts server sales in the fourth quarter will increase year-over-year by 17 per cent worldwide and by 26 per cent in the US. Fourth-quarter sales will be driven by companies replacing older systems in order to get Y2K compliant and further fuelled by the expected availability of more Xeon chips, Ahari said.
In the third quarter of 1998, economic upturns around the world helped to reinvigorate the stalled PC server market, Ahari added.
"The resurgence in the Japanese PC server market had a positive impact on worldwide growth rates, but we expect Japan to be as unpredictable as it has been in the fourth quarter."
Globally, vendors in the third quarter sold off excess inventories and outdated models to clear out the distribution channel. The increase in sales of uni-processor systems also boosted growth.
In the US meanwhile, PC server shipments grew 10 per cent year-over-year and 18 per cent sequentially, or just short of 203,000 units, IDC said.
Shipments in Western Europe grew 45 per cent year-over-year and 13 per cent sequentially, representing just over 168,500 PC servers. Japanese PC server shipment growth was up 14 per cent year-over-year and 36 per cent from the previous quarter, or just over 56,000. And in the Asia-Pacific region, PC server shipments increased 17 per cent year-over-year and 3 per cent from the previous quarter, or just under 60,000 units.
Overall, Compaq Computer in the third quarter fortified its hold as the leading vendor in the PC server market, partly due to the addition of Digital's PC server products and an expanded customer base, IDC said.
Meanwhile in the US, the leading vendors that sell PCs direct, namely Dell Computer, Gateway and Micron, now account for 25.9 per cent of the US PC server market compared to 17 per cent a year ago. Most sales again in this segment were on the low end. However, due to the success of Dell and other direct sellers, all major PC vendors including Compaq are now rethinking their channel strategy to include online sales.