ACADEMIA

SAN JOSE, CA -- The difficult economic times are still having an effect on the server industry as worldwide server shipments totaled 1.08 million in the second quarter of 2002, an increase of 0.5 percent over the second quarter of 2001, according to preliminary statistics by Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB). "The weak business environment worldwide continues to have a great impact on the server industry," said Shahin Naftchi, senior analyst covering servers for Gartner Dataquest's Computing Platform Worldwide program. "Because of customers' uncertainty of their own business, purchasing high-end servers, changing to a new platform and signing big contracts are still deferred, which elongate the sales cycle. For the time being, customers are focusing on deployments that can yield quick return on investments by purchasing less expensive systems or upgrading their established systems if necessary." The combination of Hewlett-Packard and Compaq moved it into first place in the worldwide rankings, with 30.5 percent of the market. Dell fell to the No. 2 spot, but increased its market share to 18 percent, up from 16 percent one year ago. The United States server market showed a nearly 10 percent increase in the second quarter of 2002, with shipments of 482,647 units, up from 439,163 in the second quarter of 2001 (see Table 2). The merger of HP and Compaq had a significant effect on the U.S. vendor rankings. As a result, HP assumed the No. 1 spot with 26.8 percent of the market. This pushed Dell into second place with 24 percent market share, followed by IBM, Sun and Gateway. "Since the merger of HP and Compaq is still in its early stage, HP is still faced with the challenges of transitioning its product lines and integrating the two corporate cultures," said Jeffrey Hewitt, principal analyst for Gartner Dataquest's Servers Worldwide program. " On the other hand, the post-merger challenges facing HP may benefit customers if the company decides to offer better prices and attractive contracts to protect its installed customer base." This is the second quarter of positive growth for the United States., prompting speculation that the region may be signaling the end of the market downturn. However even though there are signs of unit stabilization in the United States, the market has yet to show signs of consistent revenue growth. Gartner Dataquest analysts say that without a stable revenue stream, it is unclear whether many companies would have enough confidence to invest heavily in new server equipment. These results are preliminary. Final statistics will be available soon to clients of Gartner Dataquest's Servers Quarterly Statistics program. This program offers a comprehensive, global market information service that analyzes and documents the server industry. For more information, visit www.gartner.com.