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To: Night Writer who wrote (93796)	11/19/2001 3:20:22 PM
From: Elwood P. Dowd	Respond to of 97611

IBM Captures Bigger Chunk of Shrinking Server Market Monday November 19 01:10 PM EST IBM Captures Bigger Chunk of Shrinking Server Market By Tim McDonald, www.NewsFactor.com The bad news for IBM (NYSE: IBM - news) and others in the computer server segment is that the market is shrinking dramatically, according to new research. The good news for IBM -- but not the others -- is that IBM's share of the dwindling market continues to grow. The global server market contracted by 23.4 percent in the third quarter compared to the same period last year, said a report by market research firm Gartner Dataquest. Worldwide server sales fell from US$14.1 billion in last year's third quarter to $10.8 billion this year. Sequentially, sales dropped 6 percent, from $11.6 billion in the second quarter of 2001. The percentages are a bit worse in the U.S. The market dropped 29.4 percent from the year-earlier quarter and 9 percent from the previous quarter, to $3.9 billion. IBM Hurts Less Most of the drop has been attributed to the general economic malaise that has virtually paralyzed information technology spending. Large firms have cut back drastically, and many of the smaller firms that fueled previous growth have folded. IBM has suffered less than its competitors, largely because it is doing well in several different server markets. Its $3.3 billion in sales is more than twice that of its three closest rivals. Compaq Computer (NYSE: CPQ - news), Sun Microsystems (Nasdaq: SUNW - news) and Hewlett-Packard (NYSE: HWP - news) each had between $1.4 and $1.5 billion in sales. Nearly a Third of Market Big Blue has taken advantage of its competitors' problems by grabbing a 30.3 percent market share, a year-over-year climb of 7 percent. IBM also posted the largest quarterly gain, 2.3 percent. Hewlett-Packard's share rose 0.1 percent to 13.1 percent year-over-year, while other major companies lost ground. Sun's market share dropped 3.6 percent to 13.7 percent, and Compaq dropped 1.9 percent to 13.8 percent. Dell Computer (Nasdaq: DELL - news) lost 0.1 percent of its market share, slipping to 6.4 percent. IBM is also the only major company to post revenue growth from the second to the third quarter, while industry-wide revenue declined 6.5 percent from the second to third quarter. Third quarter revenue was $3.28 billion compared to $3.3 billion for the same time last year. IBM dipped slightly from a year earlier, while its rivals' revenues plunged anywhere from 23 to nearly 40 percent. Rivals Stumbling Hewlett-Packard announced last week that it is canceling its 3000 server line, phasing it out over five years in favor of HP 9000 Unix (news - web sites) servers and NetServer Windows and Linux (news - web sites) servers -- a move that has angered some of its customers. The company, which is warding off controversy surrounding its highly publicized proposed merger with Compaq, is offering various financial incentives to keep customers from jumping ship. Compaq has been forced to delay the release of its Itanium servers because the new and controversial Itanium processor, co-developed by Intel and Hewlett-Packard, has not passed Compaq's rigorous stress tests, according to published reports. Big Blue in the Pink Meanwhile, IBM's future in the server market looks rosy. The company is scheduled to launch its most important Intel-based server, built around a chip that enables a 16-processor system. In addition, it is already developing a 32-processor system that it may license to other companies. At the Comdex (news - web sites) Fall 2001 computer show, IBM showcased its new line of "Enterprise X Architecture" servers, which will be formally announced later this month. The series uses a combination of Intel chips and IBM technology with the goal of offering customers cheaper mainframe-like servers.