Server Sales Weak Due To Y2K

Not all vendors had a financially happy
Christmas this year. The latest data from International Data Corp.,
a global forecaster of information technology (IT) markets and
trends, indicates a significant weakness in the worldwide server
market for the third quarter of 1999.

Third quarter 1999 figures indicate total factory revenue worldwide
at $13.5 billion, that's a decline of 10 percent when compared to
the third quarter of 1998.

According to IDG, the decline was led by a significant drop in
sales of high-end systems, which in turn, was caused by Y2K
concerns.

Third quarter 1999 saw the Western European server market
experience a decline of 19 percent in revenues over the same
quarter a year ago to $3.5 billion.

The Japanese market declined 7 percent over the same period,
while factory revenues in the US declined 3 percent, to a total
of $5.2 billion.

The only region which experienced a growth for third quarter
1999, according to IDG, was the Asia/Pacific market, with a 21
percent increase in sales up to an even $1 billion.

Sales to first-time server users had a robust growth. According
to IDG, the "entry server class" grew 12 percent to $7.2 billion
as companies tried to establish the necessary infrastructure for
increased e-commerce and Internet-related activities.

Among server manufacturers, Compaq Computer Corp. [NYSE:CPQ]
experienced a growth of 9 percent to $1.9 billion in sales.

Hewlett-Packard [NYSE:HWP] saw modest revenue gains in the
US, owing to strong sales of its Netserver product family, and
modest improvement in the sales of its 9000 family of products.

Market shares in Japan for local vendors saw steep declines as
both Fujitsu and NEC lost ground to American competitors IBM
[NYSE:IBM] and Sun Microsystems [NASDAQ:SUNW]. The American
companies had growth rates of 10 percent and 27 percent,
respectively.

Dell [NYSE:DELL] and Sun Microsystems both outpaced the
weakened market with 40 percent and 18 percent year-over-year
growth, respectively.

IDG claims that the market for server vendors is continuing to
consolidate and cites the finding that the top five vendors earned
71 percent of the total server market revenues. That percentage
reflects a four-point increase over third quarter 1999.

"The third quarter 1999 revenue decline was led by high-end
systems as companies suspended system capital purchases to wait
for the turning of the New Year," said Hoang Nguyen, research
analyst for IDC's Worldwide Quarterly Server Tracker.

In an interview with Newsbytes, Nguyen said that, while a drop
was expected, the size of the drop came as a bit of a surprise.
However, although Nguyen said that IDG was in the business of
collecting data, and not making forecasts, he did not expect an
equal or greater decline for the fourth quarter of 1999.

Nguyen indicted that the server market slowdown will continue for
a while - as IT shops recover from Y2K and reestablish plans for
systems purchases.

Nguyen told Newsbytes that there should be an upturn in the server
market in the second quarter of 2000, with the biggest percentage
growth coming from the Asia/Pacific countries. He also indicated
that Japan would be a prime market as the country is still in the
process of its economic turnaround.

Reported by Newsbytes.com, http://www.newsbytes.com