News

NT Server Sales Slow in Third Quarter 1998

• By Scott Bekker
• 01/05/1999

The slowdown conforms to a tailing off of sales growth in the server market overall, according to IDC's Quarterly Server Tracking program. "Major market turmoil in Japan, coupled with worldwide price pressure, have substantially contained revenue growth" in the overall server market, says Jim Williamson, an IDC senior research analyst.

Price pressure was most clearly illustrated in the overall server market. Revenues dropped 3 percent from the third quarter 1997 to the third quarter 1998, even as the number of units shipped rose 15 percent.

The same factors extend to the Windows NT world, although the effect was less severe. Revenues of servers running NT rose from $1.5 billion in Q3 1997 to $1.8 billion in Q3 1998 (19 percent growth). Shipments rose from 190,676 units to 274,626 units (44 percent growth).

For the previous two quarters, NT server sales growth had been humming along at year-over-year growth rates of 31 percent for revenues and 52 percent to 53 percent for unit shipments, according to IDC numbers. Year-over-year revenue growth for the third and fourth quarters of 1997 were 76 percent and 55 percent, respectively.

"Average prices were down about 17 percent from the same period a year ago. That's a little faster than you would expect [prices to drop]," Williamson says of the Q3 1998 crop of servers running Windows NT. "There was a tremendous amount of difficulty in Japan, with revenues declining by 14 percent year over year. That was after a pretty good Q3 in 1997."

Meanwhile, revenues for servers running varieties of the Unix operating system also grew at 7 percent over the previous quarters. "I think what you are beginning to notice is that a lot of companies are coming to the realization that NT can't do everything and investing in Unix," Williamson says. "In addidition, we saw Microsoft backing off some of the claims for 5.0," a reference to a speech by Microsoft president Steve Ballmer in October that lowered expectations for Windows NT 5.0/Windows2000, which is slated to come out sometime this year.

Such chinks in Microsoft's armor don't signal a coming slide for NT, though. "In all regions, we saw increases in NT shipments," Williamson says. "IDC still believes that NT has a very strong future."

Among hardware vendors, Compaq Computer Corp. held the lead in sales revenues for servers running NT with $521 million or 29 percent of the total. Rounding out the top five in NT server sales were Dell Computer Corp., Hewlett-Packard Co., IBM Corp. and NEC Computer Systems Division.

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The drop in revenues for the overall server market for the third quarter of 1998 was driven by sales of servers running Novell NetWare, which fell 12.3 percent; OpenVMS, which dropped 15.9 percent; and other proprietary systems, which plummeted 31.6 percent. -- Scott Bekker, Staff Reporter