Linux server sales top $1 billion in Q3

Quarterly sales of servers running the Linux operating system topped $1 billion for the first time during the third quarter of 2004, analyst company IDC reported Wednesday. With year-over-year revenue from Linux server sales up 42.6 percent, Linux accounted for more than 9 percent of the $11.5 billion in servers sold worldwide during the quarter, which ended Sept. 30, the research firm said.

The server market as a whole grew by 5.5 percent from the year-earlier figures, an indication that IT spending is on the rise from the conservative levels that IDC has tracked over the last few years, said Vernon Turner, group vice president and general manager of enterprise computing with IDC. "We see server spending continuing to be very strong, but more importantly, it's stronger than the rate of inflation," he said. "CEOs are finally saying, 'Lets get beyond normal replacement cycle.'"

Strong sales of both Linux and Microsoft's Windows operating system fuelled an 18.2 percent growth rate for "volume systems," which tend to be powered by Intel and Advanced Micro Devices' x86 processors. Windows server revenue grew by 13.3 percent year-over-year, IDC said.

When measured by revenue, IBM remained the No. 1 server vendor with $3.66 billion in revenue, or 31.7 percent of the server market. Hewlett-Packard was second with $3.09 billion in revenue.

Dell Inc. was the fastest-growing server vendor, with revenue jumping 14.1 percent from its year-earlier figures. The company finished the quarter with $1.17 billion in server sales, only slightly less than No. 3 server vendor, Sun Microsystems, whose revenue for the quarter was $1.18 billion, up 0.1 percent from year-earlier figures.

Sales of midrange servers priced between $25,000 and $500,000 -- traditionally a strong area for Sun's Unix systems -- were down 10.2 percent for the quarter, reflecting a shift toward volume systems, according to Turner. "The ongoing concern is what happens in the midrange Unix market in the long run," he said. "Are those platforms vulnerable to Linux replacements by platforms like Opteron?" he asked, referring to AMD's 64-bit server processor.

Sales of blade servers hit $287 million during the quarter and now account for 2.5 percent of the market, IDC said. Shipments of blade servers were up 44 percent from last year and IBM was the top blade vendor, with 44.2 percent of the market.

When measured by number of units shipped, HP was the top vendor with 471,000 units shipped during the quarter. Dell and IBM were in second and third place with 347,000 and 259,000 units shipped, respectively. With 81,000 servers shipped, Sun actually saw the number of units it shipped decline by 0.9 percent from the year-earlier quarter.