IBM Winning the Server War

IDC Research last week released its second-quarter server numbers and IBM (NYSE: IBM  ) was the big winner. Let's review:

Vendor

2Q 08 Revenue

Market Share

2Q 07 Revenue

Market Share

Revenue Growth

IBM

$4,633

33.2%

$4,071

31.1%

13.8%

Hewlett-Packard (NYSE: HPQ  )

$3,823

27.4%

$3,709

28.3%

3.1%

Dell (Nasdaq: DELL  )

$1,740

12.5%

$1,526

11.6%

14.1%

Sun Microsystems (Nasdaq: JAVA  )

$1,562

11.2%

$1,683

12.8%

(7.2%)

Source: IDC Research.

Notice how Big Blue scored the biggest gain in market share and came within spitting distance of Motley Fool Inside Value pick Dell in terms of overall revenue growth.

Sun Microsystems was the biggest loser, obviously. Hewlett-Packard, too. There's no glory in losing market share. But I also can't see how Dell spins these numbers positively. How can the company that cut prices to boost sales and gain market share gain less than IBM did?

Here's how: Windows servers, while still tops overall with more than 36% of the market, aren't as in demand as they used to be. Revenue from sales of network engines running Microsoft's (Nasdaq: MSFT  ) server operating systems grew just 1.7% in Q2. By contrast, those running Linux from Red Hat (NYSE: RHT  ) and its peers grew 10%.

That favors IBM, a heavy user of Linux. But Big Blue's advantages also run deeper. Here's Matt Eastwood, group vice president of Enterprise Platforms at IDC, speaking in a statement:

The server market has experienced acceleration in revenue growth over the past 4 quarters. Customers around the globe continue to deploy a wide range of technologies to meet their computing needs and as a result IDC saw strong growth in blades, Unix systems, and IBM System z demand across the marketplace. Diversity in market demand demonstrates customers do not believe a single standardized infrastructure is capable of meeting all their computing needs. [Emphasis added.]

A mixture of needs. Doesn't that sound like something best addressed by a company whose specialty is catering to big business problems with technology-driven services? A company like, say, IBM?

You've seen the numbers. You know the answer.

Get your clicks with related Foolishness:

Fool contributor Tim Beyers owned shares of IBM at the time of publication. He also hunts for the best of tech as a contributor to Motley Fool Rule Breakers. Here's how to try this market-beating service free for 30 days. Get access to all of Tim's Foolish writings here.

Dell, Intel, and Microsoft are Inside Value picks. The Motley Fool's disclosure policy was served the best gin and tonic it's had in years at its local last night.


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