Is there light at the end of the tunnel? According to a report from researcher IDC, Sun Microsystems (NASDAQ:SUNW) was the only one (of the top four global server vendors) to experience year-over-year revenue growth during the second quarter ended in June.
Frankly, the numbers for the entire server market are startling:
|
Vendor |
Q2 2006 revenue |
Q2 2005 revenue |
YOY growth |
|---|---|---|---|
|
IBM (NYSE:IBM) |
$3,808 |
$3,893 |
(2.2%) |
|
Hewlett-Packard (NYSE:HPQ) |
$3,420 |
$3,480 |
(1.7%) |
|
Sun Microsystems |
$1,585 |
$1,372 |
15.5% |
|
Dell (NASDAQ:DELL) |
$1,269 |
$1,286 |
(1.3%) |
I mean, wow. What happened? Opteron, that's what. Sun adopted Advanced Micro Devices' (NYSE:AMD) speedy server chip more than two years ago, and it appears to be paying dividends at Dell's expense in the high-growth x86 -- or Intel-compatible -- segment of the market.
IDC explains in its press release, "HP and Sun were the only top five server vendors to outgrow the market in Q2 2006 -- growing [sales] 3.6% and 48% respectively -- and gaining x86 market share in the process." In other words, Sun's products are selling very well.
Dell, for its part, saw both revenue and market share decline. IDC now says the ailing computer maker accounts for 10.3% of global server revenue, 2.6 percentage points behind Sun. Can that gap widen? Yes, but only if Sun figures out how to stay different. That won't be easy if Dell extends its relationship with AMD to include Opteron chips in its volume servers. ("Volume server" is a term typically used to describe a computer with fewer than four processors.)
There's also the chance that long-standing Dell partner Intel (NASDAQ:INTC) will see its newer server chips gain traction, which could hurt Sun and aid Dell. But I count that as a long shot, since Sun is also an Intel partner.
Nevertheless, Sun still isn't making money and isn't expected to record a profitable year before June of 2008. That's two years -- an eternity in the tech business, and more than enough time for today's brightly shining Sun to be swallowed by a Dell-sized eclipse.
Let us shed light on related Foolishness for you:
- The lights went out in June.
- It's time to say farewell to former Sun CEO Scott McNealy.
- Sun's fiscal Q2 was as bad as they come.
Dell and Intel are Motley Fool Inside Value selections. Ask us for anall-access passto the service and you'll be privy to chief advisor Philip Durell's best picks, which collectively are beating the market by more than 2%. You'll also receive instructive lessons on valuation and company analysis. Give Inside Value a try; it's free for 30 days.
Fool contributor Tim Beyers worked at Sun in the late '90s. You'll have to forgive him if he's rooting for a comeback. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on all the stocks in Tim's portfolio by checking his Fool profile . The Motley Fool's disclosure policy is always on the up-and-up.
