Worldwide Server Shipments Increase 14 Percent, While Industry Revenue Remains Flat For The First Quarter Of 2006

Garter: Worldwide server shipments for the first quarter of 2006 increased 13.7 percent over the same quarter last year, while Worldwide server revenue for the same period remained flat. Worldwide server revenue totaled $12.35 billion in the first quarter of 2006, compared with Worldwide revenue growth of $12.34 in the first quarter of 2005. Worldwide server shipments totaled nearly 2 million units in the first quarter of 2006, up from 1.7 million units in the same period last year. The x86 server portion of the market continues to be the strongest segment. x86 servers remain as the leading server choice for meeting ongoing Web-related growth while other segments have started the year in a less-positive mode. RISC-Itanium Unix servers fell just 0.9 percent in shipments for the quarter but dropped a more significant 5.1 percent in revenue. The decline at the high end and the replacement at the low end with Linux on x86 servers continue to put negative pressure on this portion of the market. The blade segment of the market displayed strong growth again, with volumes increasing 46 percent over the same period last year. IBM holds the leading market position in blade servers in volume and revenue terms. IBM continued to lead the Worldwide server market based on revenue (see Table 1). However, the company exhibited a revenue decrease of 3.7 percent in the first quarter, while the total market remained flat for the same period. IBM's revenue decline was driven primarily by drops in its i, p, and z product lines, but its x86-based server product lines outperformed the market, growing 11 percent in revenue for the quarter to provide a degree of counterbalance to the decline. Table 1 Worldwide: Server Vendor Revenue Estimates for First Quarter of 2006 (U.S. Dollars)

Company	1Q06 Revenue	1Q06 Market Share (%)	1Q05 Revenue	1Q05 Market Share (%)	1Q05-1Q06 Growth (%)
IBM	3,534,802,081	28.6	3,668,863,909	29.7	-3.7
Hewlett-Packard	3,456,922,254	28.0	3,448,175,694	27.9	0.3
Dell Inc.	1,306,029,983	10.6	1,333,031,283	10.8	-2.0
Sun Microsystems	1,298,889,283	10.5	1,206,673,421	9.8	7.6
Fujitsu/Fujitsu Siemens	765,380,569	6.2	886,492,936	7.2	-13.7
Other Vendors	1,987,282,939	16.1	1,801,599,480	14.6	10.3
Total	12,349,307,109	100.0	12,344,836,723	100.0	0.0

Source: Gartner Dataquest (May 2006) In server shipments, Hewlett-Packard retained its lead in the first quarter and posted yearly shipment growth of 8 percent (see Table 2). However, this was lower than the overall industry shipment increase of 13.7 percent. While remaining product lines exhibited shipment declines, HP's ProLiant servers grew 8.3 percent, and HP Integrity servers pushed ahead with strong double-digit growth of 29.9 percent for the quarter. These shipment contributions helped bring HP's revenue results in line with the overall market. Sun Microsystems returned to server revenue growth for the first time in almost two years, driven by increases in its UltraSPARC and its Opteron-based server revenue. Dell, on the other hand, while posting a 7.1 percent shipment growth for the quarter, suffered an atypical revenue drop of 2 percent for the period. Table 2 Worldwide: Server Vendor Shipments Estimates for First Quarter of 2006 (Units): see Worldwide server shipments for the first quarter of 2006 Publ 20060523