Gartner Dataquest Says Worldwide Server Market Experienced Flat Growth in Second Quarter of 2002; U.S. Server Market Showed Second Consecutive Quarter of Positive Growth.

Business Editors/Technology Writers

SAN JOSE, Calif.--(BUSINESS WIRE)--July 29, 2002

The difficult economic times are still having an effect on the server industry as worldwide server shipments totaled 1.08 million in the second quarter of 2002, an increase of 0.5 percent over the second quarter of 2001, according to preliminary statistics by Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB).

"The weak business environment worldwide continues to have a great impact on the server industry," said Shahin Naftchi, senior analyst covering servers for Gartner Dataquest's Computing Platform Worldwide program. "Because of customers' uncertainty of their own business, purchasing high-end servers, changing to a new platform and signing big contracts are still deferred, which elongate the sales cycle. For the time being, customers are focusing on deployments that can yield quick return on investments by purchasing less expensive systems or upgrading their established systems if necessary."

The combination of Hewlett-Packard and Compaq moved it into first place in the worldwide rankings, with 30.5 percent of the market. Dell fell to the No. 2 spot, but increased its market share to 18 percent, up from 16 percent one year ago (see Table 1).

Table 1
Preliminary Worldwide Server Unit Shipment Estimates for 2Q02 (Units)
---------------------------------------------------------------------
          2Q02        2Q02            2Q01      2Q01 Market   Growth
Company  Shipments   Market Share(%) Shipments   Share (%)      (%)
-------- ----------- --------------  ---------- ----------- ----------
Hewlett-
 Packard     329,965   30.5           363,482     33.8        -9.2
Dell         194,776   18.0           172,536     16.0        12.9
IBM          156,906   14.5           161,649     15.0        -2.9
Sun
 Microsystems 70,718    6.5            63,842      5.9        10.8
NEC           23,281    2.2            22,872      2.1         1.8
Others       306,482   28.3           292,504     27.2         4.5
Total      1,082,128  100.0         1,076,885    100.0         0.5
---------------------------------------------------------------------
Note: The data for Hewlett-Packard and Compaq have been combined.
Source: Gartner Dataquest (July 2002)

The United States server market showed a nearly 10 percent increase in the second quarter of 2002, with shipments of 482,647 units, up from 439,163 in the second quarter of 2001 (see Table 2). The merger of HP and Compaq had a significant effect on the U.S. vendor rankings. As a result, HP assumed the No. 1 spot with 26.8 percent of the market. This pushed Dell into second place with 24 percent market share, followed by IBM, Sun and Gateway.

"Since the merger of HP and Compaq is still in its early stage, HP is still faced with the challenges of transitioning its product lines and integrating the two corporate cultures," said Jeffrey Hewitt, principal analyst for Gartner Dataquest's Servers Worldwide program. " On the other hand, the post-merger challenges facing HP may benefit customers if the company decides to offer better prices and attractive contracts to protect its installed customer base."

Table 2
Preliminary U.S. Server Unit Shipment Estimates for 2Q02 (Units)
-----------------------------------------------------------------
              2Q02     2Q02 Market   2Q01     2Q01 Market    Growth
Company     Shipments   Share (%)   Shipments   Share (%)     (%)
--------   ---------- ------------ ---------- -----------  ---------
Hewlett-
 Packard     129,499     26.8       128,467     29.3         0.8
Dell         115,877     24.0        98,856     22.5        17.2
IBM           57,715     12.0        58,264     13.3        -0.9
Sun
 Microsystems 36,319      7.5        29,160      6.6        24.6
Gateway        5,500      1.1         7,300      1.7       -24.7
Others       137,737     28.5       117,116     26.7        14.9
Total        482,647      100       439,163    100.0         9.9
--------------------------------------- ----------------------------
Note: The data for Hewlett-Packard and Compaq have been combined.
Source: Gartner Dataquest (July 2002)

This is the second quarter of positive growth for the United States., prompting speculation that the region may be signaling the end of the market downturn. However even though there are signs of unit stabilization in the United States, the market has yet to show signs of consistent revenue growth. Gartner Dataquest analysts say that without a stable revenue stream, it is unclear whether many companies would have enough confidence to invest heavily in new server equipment.

These results are preliminary. Final statistics will be available soon to clients of Gartner Dataquest's Servers Quarterly Statistics program. This program offers a comprehensive, global market information service that analyzes and documents the server industry. To subscribe to these programs, please call 408-468-8000.

Gartner Dataquest is the recognized leader in providing the high-technology and financial communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, and services sectors of the global information technology industry.

Gartner, Inc. is a research and advisory firm that helps more than 10,500 clients understand technology and drive business growth. Gartner's businesses consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has 4,000 associates, including 1,200 research analysts and consultants, in more than 90 locations worldwide. Fiscal 2001 revenue totaled $963 million. For more information, visit www.gartner.com.