Gartner, IDC: Sun revenue rebounds after two year skid

Sun revenue rebounds: Market share reports released yesterday by research firms Gartner and IDC show Sun turning its numbers around while much of the server market remains flat.

Sun revenue rebounds: Sun Microsystems Inc. is turning its overall server revenues from red to black for the first time in two years, despite flat server revenues across the industry, according to first quarter market share reports just released by research firms Gartner Inc. and IDC.

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Gartner listed worldwide Sun revenue growth at 7.6% (approximately $1.3 billion over $1.2 billion in Q1 2005) while IDC put the number at 5.8% (about $1.27 billion over $1.2 billion), increasing its server market share from 10.0% to 10.8%.

This contrasts with IDC's estimate that factory revenue in the worldwide server market declined 1.9% overall. Gartner had the growth rate as being flat. Following 10 consecutive quarters of revenue growth, this was the second consecutive quarter of decline and the slowest rate of volume server revenue growth (6.3%) in more than three years, according to IDC.

Sun led the pack in growth of RISC/Itanium Unix revenues -- up 3.3% -- and represented the only positive return among competitors in the space, according to Gartner. Hewlett-Packard Co. (HP) was second in year-over-year growth at -4.9%, with IBM in third at -8.4%. Sun has salvaged the Unix revenue crown since IBM dethroned the company in Q2 2005, but it remains a close battle. IDC now lists Sun with 32%, HP at 29.7% and IBM at 29.6%.

"Sun's server revenue growth and market share gains are an indication that the company's most recent product strategies are beginning to resonate with customers," said Steve Josselyn, research director, Enterprise Server research at IDC. "While the majority of Sun's server revenue is driven by traditional UltraSPARC IV and UltraSPARC IV+ systems, the introduction of the Niagara-based chip multithreaded machines and Opteron-based x64 Galaxy products have begun to generate significant customer interest."

Tony Iams, vice president and senior analyst for Rye Brook, N.Y.-based Ideas International Ltd. noted that Sun gained 84.3% factory revenue in the x86 space, where it has long withered. Though it still doesn't even register on the map in terms of market share percentage, Iams said it reassures the market that Sun, after a rough four or five years, is responding to its needs and appears, as a result, a less risky investment.

"Part of their turnaround could be that the market has more confidence in Sun," Iams said. "People aren't as worried about whether Sun will be a factor in the industry. The fact that they're getting new systems into the market -- plus other software initiatives that may have a halo effect -- that could be causing people to more easily open their checkbooks."

Charles King, principal analyst for Hayward, Calif.-based Pund-IT Research, agreed Sun's x86 turnaround, as well as upcoming "Rock" servers make a show that Sun is not floundering.

"The company has had a fairly generic approach to x86, I think Sun thought of it as a joke for way too long," King said. "You don't want to be locked out of the fastest growing market because people in your organization do not believe there's anything there. The market drives the market, vendors don't drive the market. If customers want x86, you better be damned sure you have some product out there. But with Galaxy, they brought some original Sun folks back with the intellectual capital … and they're really putting their imprint onto it."

But Gordon Haff, principal IT advisor at Nashua, N.H.-based Illuminata Inc., wrote in an email that Sun still has a lot of work ahead in order to climb out of the ditch.

"These are promising early signs for Sun, but Opteron sales are still in the "other" category," Haff wrote. "Good starts are all well and good, but they'll have to climb the scales considerably to translate into truly meaningful Sun revenue."

Overall, HP and IBM tied for the No. 1 revenue position with 28.1% and 27.9% share respectively, with IBM loosing .5 points of share and HP gaining .4 points of share, according to IDC.

Linux servers posted their 15th consecutive quarter of double-digit growth, with year-over-year revenue growth of 17.0% and unit shipments up 14.4%, according to IDC. Although Linux servers now represent 12.2% of all server revenue, revenue growth for the quarter was approximately half the growth rate observed one year ago.

Microsoft Windows servers continued to show strong growth as revenues grew 5.9% and unit shipments grew 12.9% year over year, according to IDC. Quarterly factory revenue of $4.4 billion for Windows servers represented the largest single segment of the server market.

Matt Eastwood, program vice president of Worldwide Server Research at IDC, gave his take on the rest of the market.

"After three years of consistent growth, the server market began to show signs of deceleration in the first quarter. Although customers continued to invest in new infrastructure in the quarter, IT spending patterns are evolving, and these shifts are clearly having an impact on the server market," Eastwood said.

Let us know what you think about the story; e-mail: Joe Spurr, News Writer

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