London, November 25, 2004 -- The ongoing popularity of industry standard x86 servers continued to drive growth in the Western European server market. According to IDC's Western European Quarterly Server Tracker, server sales grew for the fifth consecutive quarter in 3Q04 in Western Europe, with 4.4% year-on-year revenue growth. System shipments increased by 19.2% compared to the quarter a year ago to reach 375,000 units shipped. x86 industry standard servers increased footprint in organizations' IT infrastructures.

While times remain extremely difficult for all the other major segments on the market, x86 servers enjoyed a comfortable 20% year-on-year growth in unit shipments, driving 24.5% year-on-year growth in revenue. In comparison, RISC systems factory revenue declined by 11.4% in the same period, despite a 9.7% increase in unit shipments. CISC systems failed to record three consecutive quarters of positive growth with shipments sharply declining by 46.3% compared to the quarter a year ago, resulting in a 3.7% revenue drop on the same period. "For the first time, x86 servers generated more revenue than sales from RISC-based systems in 3Q04," said Nathaniel Martinez, program manager with IDC's European Server Group.

In addition, the market success of recently launched x86-64 servers, which support both 32-bit and 64-bit software applications, continued. x86-64 servers recorded 112.1% sequential growth in unit shipments and 65.5% sequential growth in factory revenue. However, while this segment only accounted for approximately 5% of the overall x86 shipments in 3Q04, sales from this category are expected to accelerate with both AMD Opteron and Intel EM64T processors now available and Windows Server support due in 1H05. The introduction of x86-64 systems is causing some disruption, adding to a clearer repositioning of EPIC systems. EPIC systems also saw a very good quarter, growing significantly in 3Q04 and exceeding 1,000 units shipped quarterly for the third consecutive quarter.

"European organizations are slowly transitioning from corporate refresh projects to strategic large-scale IT infrastructure investments, contributing to the ongoing recovery of the European server market," said Martinez. "Overall, growth on the European server market was mainly fuelled by demand in the volume server space, where factory revenue grew by 31.4% year on year, compared to a 9.4% decline for midrange servers and a 17.0% decline for high-end systems in the same period. Recent technology developments, such as server blades, x86-64, virtualization, and dual-core processors, while reshaping the server landscape, should accentuate this positive trend in the near term."

Market Highlights

The x86 industry standard server market continued to lead the recovery of the European server market, growing factory revenue by 24.5% on an annual basis. A segmentation of the x86 market by CPU capacity exhibits growth across 1-way, 2-way, 4-way, and 8-way segments, with 8-way segments displaying the highest growth of all. 2-way servers retained the lion's share of the market, with 74.2% of shipments. Recently launched x86-64 servers, which support both 32-bit and 64-bit applications, showed 112.1% sequential growth in unit shipments.

Server average selling value declined by 5.9% compared with the second quarter of 2004 and by 12.4% year on year.

The weak dollar against European currency continues to artificially deflate U.S.-based vendors' prices compared to their European counterparts.

• The Windows server market showed strong growth, with factory revenue increasing by 25.9% year on year and unit shipments gaining 23.3%. Windows servers accounted for 29.6% of Western European server revenue. In contrast, Unix servers declined 6.1% in revenue year on year, despite a 15.4% shipment increase. It continued to dominate the market, however, with 41.6% revenue share.
• The third quarter of calendar 2004 highlighted the increasing acceptance of Linux servers within datacenter environments. Linux server factory revenue grew by 41.2% year on year, marking the third consecutive quarter of double-digit growth, and unit shipments grew by 17.4%. · The server blade market showed continued growth with shipments increasing by 53.8% year on year and factory revenue gaining 13.3% sequentially. Overall, bladed servers represented 2.1% of 3Q04 server market revenue.

Vendor Performance Highlights

• IBM retained the number 1 spot in the Western European server market despite slightly underperforming against the European average, with 0.1% year-on-year revenue growth.
• HP took the number 2 spot, with 30.9% market share, growing factory revenue by 4.3% year on year. In unit terms, HP held on to the number 1 position, shipping 146,721 units, a 17.5% increase compared to the quarter a year ago.
• Sun Microsystems grew factory revenue in line with the overall European Server market and grabbed 11.2% revenue share.

Hit by a disadvantageous dollar/euro conversion rate, Fujitsu Siemens had a difficult quarter and saw its factory revenue decline by 5.1%, while Dell continued to outpace the market, recording 35.7% growth in factory revenue.

IDC's Quarterly Server Tracker
IDC's Quarterly Server Tracker is a quantitative tool for analyzing the server market on a quarterly basis. The tracker includes quarterly shipments (both ISS and upgrades) and revenue (both customer and factory), segmented by vendor, family, model, region, country, operating system, price band, CPU type, and architecture.

For more information, please contact Mikhail Novikov (+7 495 975 00 42) in Russia, Ukraine, or any of the CIS countries; or Tatiana Hinova (+420 221 423 140) from anywhere else.

About IDC
IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. We analyze and predict technology trends so that our clients can make strategic, fact-based decisions on IT purchases and business strategy. Over 700 IDC analysts in 50 countries provide local expertise and insights on technology markets. Business executives and IT managers have relied for 40 years on our advice to make decisions that contribute to the success of their organizations.

IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. Additional information can be found at www.idc.com

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