The PC server market grew only eight per cent year on year in 1998, but will be boosted in the year ahead by sales of Intel?s Xeon processor, according to the latest figures from IDC.
The market research firm?s report, "PC Server Year in Review", also shows that Compaq?s market leadership diminished last year, although it still held on to its pole position.
Amir Amahrai, senior analyst for IDC?s commercial systems and servers group, said: "The revenue slowdown has been mostly caused by a drop in average sales value and a slowdown in high end PC servers."
Growth rates in 1997 and 1996 were 42 per cent and 50 per cent respectively.
Although the market underperformed in 1998, Amahrai said the long term outlook remained favourable because sales of Intel?s Xeon processor would give it a boost.
Other positive influences included increased sales of whitebox PC servers to small businesses and Internet Service Providers, consolidation among second tier vendors, and a recovery in the Japanese market.
In 1999, Amahrai added that he expected to see worldwide PC server revenue to rebound aggressively to double digit growth.
At the company level, however, Compaq is still the number one PC server vendor, with worldwide revenues of $3.8 billion. It lost four market share points compared with 1997 though, leaving it with 29 per cent, due to inventory overload in the first quarter of 1998 and what it described as "distractions" based on its acquisition of Digital Equipment.
Hewlett Packard (HP) retained second place, showing a 26 per cent sales growth compared with 1997 to reach $1.7 billion. It now owns 13 per cent of the market.
But the fastest growing PC server company in IDC?s top ten was Dell, which saw revenue growth of 76 per cent to $1.6 billion. It also won a 13 per cent market share, only fractionally behind HP, which IDC attributed to its new strategy of selling boxes over the Web.
Amahrai concluded: "However, the rapid success of Dell is leading traditional vendors to respond with two distribution options, build to order facilities and on line web sales. Compaq relaunched its build to order programme in the latter half of 1998."
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