IDC: Dip in server revenue may herald price war

IDC: Dip in server revenue may herald price war

Revenue from worldwide server sales dropped 4 per cent during the first quarter of 2001, paving the way for a possible price war that could be a boon to end users, according to market figures due out Wednesday from research company International Data Corp. (IDC).

Actual worldwide server shipments grew 12 per cent in the first quarter of 2001 compared with the same period a year ago, according to IDC. Vendors including Dell and Compaq contributed heavily to this increase through the sale of smaller servers running Windows and Linux.

But while unit shipments grew, revenue for the top server vendors fell 4 per cent from the first quarter a year ago. Tough times for vendors of high-end Unix systems like Sun Microsystems and Hewlett-Packard dragged down the revenue total, helping pave the way for what could be prime buying season for customers, IDC said.

"We are seeing a marked decline in worldwide server revenue even though vendors appear to be shipping more units than ever," said Vernon Turner, an analyst with IDC. "This would indicate a very intense price war and a great time for the customer."

IBM posted one of its best quarters in recent times, joining Dell as the only two major hardware vendors able to grow their server revenue year-over-year. Dell's revenue surged 21 per cent, while IBM's climbed 13 per cent. However, while Dell enjoyed the biggest increase, the figures compare with a smaller starting point a year ago, Turner said.

Compaq, Sun and HP all saw their revenue drop for the quarter, declining 2 per cent, 3 per cent and 5 per cent, respectively, IDC said.

IBM and Sun appear already to be reacting to the pricing pressure. In the past few months, the companies have worked to bring some of the features found on high-end servers down to lower-end products. This trend looks to continue for some time, IDC said.

Dell and Compaq, meanwhile, have been cutting prices on low-end Intel-based servers. In terms of market share, Compaq maintains a 7 per cent lead over Dell in the Windows segment and a 10 per cent lead over Dell in the Linux space.

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