Economic revival helps boost server market revenue in Q3 1999: IDC

BANGALORE: Server revenue in Asia/Pacific (excluding Japan) grew by 30 per cent annually in the third quarter of 1999, despite apprehensions about Y2K bringing down server spending in the second half of the year, the International Data Corporation (IDC) said here.

Asia’s economic revival continued to boost customer confidence, with the greatest impact in Korea where the server market grew 88 per cent annually in Q3 1999. The rebound enabled Korea to regain its pre-crisis position as the largest server market in the region. Delayed Y2K spending continued, especially in recession-hit markets such as Indonesia, Thailand and Malaysia. Entry servers, or servers priced below US$100,000, led growth in Q3 1999 as revenue increased 64 per cent over the same period last year. Intel servers contributed the most to this growth, as customers continued to respond favorably to the attractive prices and increasing robustness of these systems. Sun, IBM and Compaq performed well in the non-Intel entry server category, catering to price-sensitive Unix customers.

"A strong turnaround in most economies coupled with delayed Y2K spending helped grow server revenue in Q399." declared Avneesh Saxena, Server Research Manager at IDC Asia/Pacific. "We expect to see some slowdown in Q499 as some customers postpone their non-Y2K purchases until after the millennium. However, we still expect to see Y2K-related purchases in the last quarter of the year, especially in emerging countries which are behind in their Y2K readiness."

Competitively, the top four vendors continued to consolidate their dominance and increase market share. The region’s four largest server vendors — IBM, Hewlett-Packard, Compaq and Sun Microsystems — accounted for about 80 per cent of total server revenue.

IBM led the market with a revenue market share of 26 per cent, but this figure was down 7 percentage points since Q398. The main reason for its loss of market share was a decline in Y2K-related sales, especially in the high-end server category where the vendor’s revenue dropped 52 percent annually. HP had a strong quarter in Q399, as it grew 46 percent in revenue and its market share increased 2 percentage points over Q398. PC servers and high-end Unix servers contributed the most to HP’s growth in the third quarter.

Compaq gained revenue share both sequentially and annually, resulting in the greatest growth amongst the top four vendors, with a 54 per cent rise over Q398. The midrange category (US$100,000 — US$1M) followed by PC servers did exceedingly well for Compaq in Q399. Sun rounded out the top four with a market share of 14 per cent, which was up over last quarter and annually. The vendor grew at 45 per cent annually, and did well in its midrange and entry server businesses.

The most prominent highlight of Q399 has been the rejuvenation of Korea’s server market, once again the region’s largest after Q3 results. The PRC dropped to the second position, pushing Australia to number three and Taiwan to number four. The top four markets accounted for a total of 71 per cent of server revenue in the region. Economic recovery helped Korea’s server market rebound and facilitated consistent growth since the first quarter of 1999. The PRC slowed down in the third quarter after two good quarters in the first half of the year. A decline in high-end and midrange server revenue, due mainly to Y2K, has been the main reason for this slowdown. Both the Australian and Taiwanese server markets showed signs of slowing down due to a decline in purchases by banks and large corporations. PC servers represented the highest growth segment in both these markets, while high-end server sales declined the most. In addition to the above countries, Malaysia, Indonesia and India generated strong annual growth rates, due mainly to the economic revival which helped increase customer confidence and release pent-up demand.