Server Mania

Information technology spending is making a comeback, but recent reports have focused mostly on consumer technology purchases. Yesterday brought big news on the business front: Global sales of servers, large computers that literally "serve" software and content like the Web page you're reading right now, rose to $11.5 billion during the first quarter. That is a 7.3% increase over the same period last year, according to market researcher IDC.

Indeed, some companies, like Google, seem to be buying servers by the truckload. But who's selling? IDC says IBM (NYSE: IBM  ) led in sales, racking up $3.41 billion during the first quarter for a 29.7% share of the market. Hewlett-Packard (NYSE: HPQ  ) was second with $3.1 billion and a 26.9% share, but shipped the most units during the quarter.

Motley Fool Stock Advisor pick Dell (Nasdaq: DELL  ) has been the hot vendor in the space, increasing market share every quarter since 2001, but ended the first quarter of 2004 in a virtual dead heat with Sun Microsystems (Nasdaq: SUNW  ) . Dell booked $1.1 billion in revenue, good enough for a 9.8% share of the market. Sun lagged again, generating $1.2 billion in server sales for a 10.2% share, more than 2 points lower than its 12.5% share during last year's first quarter.

Ironically, it may be that the big winners during this buying spree aren't the box makers, but those who make servers useful. For example, IDC reports that year-over-year sales of servers based on the x86 processor design common to Intel (Nasdaq: INTC  ) and Advanced Micro Devices (NYSE: AMD  ) increased about double the global average, or 14%.

Servers running Linux operating systems, like Red Hat's (Nasdaq: RHAT  ) , also did extremely well. Sales of Linux boxes were up 57% over last year, and topped $900 million for the second consecutive quarter.

What remains for Foolish investors to consider is how a larger appetite for servers and technology infrastructure will impact companies you don't read about every day. Fellow Fool Tom Taulli takes this to heart in his analysis of Opsware for today's news.

Sure, macroeconomic conditions don't always indicate investing opportunities, but only the so-called Wise would ignore them altogether.

Is a full-scale economic recovery underway? Will information technology spending continue to drive growth? Are we headed for another bubble? Give us your best theories at the Economy and Markets discussion board.

Fool contributor Tim Beyers enjoys being served food more than Web pages. He owns none of the companies mentioned, and you can view his Fool profile here.


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