IBM beats Sun in battle for US server market

Peter Henderson

SAN FRANCISCO: Sun Microsystems Inc. lost its coveted lead in US sales of

server computers to International Business Machines Corp. in the first quarter,

while global sales for both were steady, industry benchmarker Gartner Dataquest

said on Thursday.

Sun, under pressure to prove that it has not lost its competitive edge, vowed

it would retain its position for the full year and said its bigger rival had had

a temporary boost from new product line. The latest shift in bragging rights

comes as the market for the servers that run company networks is shrinking and

vendors have pulled off their gloves for a fight over the clients still

standing.

Global server sales contracted 2 per cent in dollar terms in the first

quarter of 2001 to $12.04 billion from $12.26 billion in the quarter a year ago,

the Gartner data showed. IBM's share of the global market rose a percentage

point to 27 per cent, to $3.23 billion, while Sun's global server sales were

steady at $2.08 billion and 17 per cent market share, according to the data.

Within the United States market, Sun dipped to a 23.1 per cent share of the

server market from 23.8 per cent, while IBM rose to a commanding 30.2 per cent

from 23.6 per cent, Gartner said. The battle for market share between the two

leading firms was the source of a bitter public relations battle when Sun

overtook IBM in US sales in 2000.

A senior Sun official vowed the company would take back the market lead,

saying IBM's first-quarter gain was the result of a new product roll out that

would fade. "In calendar 2001 we will be No. 1 in the US. So stay tuned.

One quarter doesn't make a year," said Sun's vice president of product

marketing and strategic planning Shahin Khan.

He blamed the weak economy for the market's contraction, an explanation IBM

skirted: "I don't know what to attribute that to, but we grew and our

competitors didn't. We are happy at that," Tim Dougherty, IBM director of

e-business Strategy, a Unix systems group, told Reuters.

Sun's ambition has been to gain market share in the downturn. The company

lowered its sales and profit targets earlier this week for the third time since

February and analysts in a conference call repeatedly asked executives whether

competitors were bearing down.

Windows, Linux vendors build steam

The bigger change in market share in the first quarter came for the sector's

smaller players, especially those pushing non-Unix systems, which are gaining

acceptance. Hewlett-Packard Co. sales dropped 11 per cent to $1.53 billion and

Compaq Computer Corp. sales rose 8 per cent to $1.67 billion, enough for Compaq

to take the No. 3 global spot for the quarter from Hewlett.

Dell Computer Corp. revenue jumped 34 per cent to $861.37 million, keeping

the No. 5 spot. Dell and Compaq are heavy proponents of servers running

Microsoft Corp. Windows operating systems and Linux, the upstart operating

system based on Unix and developed cooperatively.

Such systems based on Intel Corp. microchips are often called an industry

standard, and a Dell spokesman said they would continue pushing higher up the

food chain of computer jobs.

For domestic Unix sales, Sun gained to 48.9 per cent of the market from 46.8

per cent, while IBM's market share jumped to 21 per cent from 15.6 per cent.

(C) Reuters Limited 2001.