Market Analysis Worldwide Workstation Shipments Rebound in Third Quarter Abstract: Preliminary worldwide workstation shipments totaled 384,756 units in the third quarter of 2003, for a year-over-year increase of 9.9 percent. By Anthony Kros Strategic Market Statement Third quarter of 2003 worldwide workstation shipments grew 9.9 percent year over year. Publication Date:7 November 2003
2 Worldwide Workstation Shipments Rebound in Third Quarter Preliminary 3Q03 Results Vendor Performance Total Market Coupled with concerns about market saturation, growth patterns from previous quarters led Gartner Dataquest to speculate in the second quarter that the worldwide workstation market may have reached a plateau and that we may stop seeing any significant growth, because of market maturity. However, contrary to these expectations, shipments grew in the third quarter to nearly 385,000 units, based on Gartner Dataquest's preliminary data. This is the highest total since the fourth quarter of 2000. This also represents a 9.9 percent increase over the third quarter of 2002 and is the largest year-over-year growth rate since the third quarter of 2000. Sequential numbers were up 5.7 percent. Previous sequential numbers show that this may be simply an anomaly, because of sequential declines in the previous two years. Despite the better-than-expected performance of the third quarter, Gartner Dataquest is not predicting sustained growth in the future. Intel Architecture vs. RISC During the second quarter, reduced instruction set computer (RISC) workstation shipments continued to slide. RISC-based shipments declined 38.7 percent year over year. During this same period, Intel Architecture (IA)-based shipments grew 11.1 percent. This growth enabled IA-based systems to take another point of market share, to account for 87 percent of total shipments. We forecast this trend to continue, because top vendors Dell, Hewlett-Packard and IBM continue to push low-end and high-end IA workstations into the market, while RISC vendors, such as Sun Microsystems and Silicon Graphics Inc. (SGI), will most likely continue to report shipment declines, eventually being relegated to niche status. Table 1 shows preliminary third quarter of 2003 worldwide workstation unit shipments. Table 1 Worldwide Workstation Unit Shipments, 3Q03 3Q02 Share (%) 3Q02 2Q03 Share (%) 2Q03 3Q03 Share (%) 3Q03 Growth (%) 2Q03-3Q03 Growth (%) 3Q02-3Q03 Dell 150,235 42.9 159,236 43.7 165,437 43.0 3.9 10.1 Hewlett-Packard 82,468 23.6 87,599 24.1 103,016 26.8 17.6 24.9 IBM 48,736 13.9 53,986 14.8 54,796 14.2 1.5 12.4 Sun Microsystems 35,870 10.2 34,154 9.4 31,285 8.1-8.4-12.8 Fujitsu Siemens 11,675 3.3 10,338 2.8 10,464 2.7 1.2-10.4 Others 21,106 6.0 18,692 5.1 19,758 5.1 5.7-6.4 Total 350,090 100.0 364,005 100.0 384,756 100.0 5.7 9.9 Source: Gartner Dataquest (November 2003) 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 7 November 2003
Dell After an atypical decline in the second quarter, Dell returned to unit shipment growth in the third quarter. Preliminary numbers show 10.1 percent growth, compared with the third quarter of 2002, to total 165,437 units. Dell attributes its success in the third quarter to better traction in the small and midsize business segment, as well as uptake in education and government accounts. Hewlett-Packard HP is a distant second behind Dell in terms of workstation unit market share, at 26.8 percent of the market. But in the third quarter, HP was competitive with Dell in terms of growth rates. HP had a phenomenal third quarter, by any vendor's expectations. In fact, it was the best quarter for HP in terms of sequential and year-over-year totals since we began tracking workstations. Preliminary numbers show that HP shipped 103,016 systems in the third quarter, representing a 17.6 percent sequential increase and 24.9 percent year-over-year growth. We can attribute this growth to HP's continuing movement to wean customers off of expensive RISC systems and into less-expensive, more-robust IA 32-bit and IA 64-bit platforms, which accounted for 95 percent of HP's shipments in the second quarter, up from 87 percent just one year ago. IBM IBM continues to show sustained performance, with preliminary totals up slightly for the third quarter. IBM managed 12.4 percent year-over-year growth, while maintaining approximately 14 percent of the total workstation market. The biggest piece of news for IBM was its ability to show growth in its RISC segment, against the market trend. Granted, the growth was sequential, but substantial (72.4 percent). IBM attributes this growth to pent-up demand for its IntelliStation POWER 275, which is used primarily for CATIA workloads and was launched in July, and increased demand for older RISC-based systems after end-of-life announcements. On the IA side, IBM has continued to focus on the high end, and that strategy seems to be paying off. E Pro has been officially terminated, while Z Pro shipments have enjoyed concurrent growth, marking a record quarter for two-way systems. Sun Microsystems Sun's workstation numbers continued to contract in the third quarter. Worldwide shipments declined 12.8 percent compared with one year ago, giving Sun an 8.1 percent market share. When comparing with Sun's numbersfromfiveyearsago,onecanseetheseverityofthedecline.inthe third quarter of 1998, Sun had 26.7 percent of the market and was experiencing year-over-year growth of 55.6 percent. On the product side, there is really no new news to report, and this may be part of the problem. Although the company's IA-based server product seems to be gaining traction, Sun has made no moves to IA on the workstation side. A move to IA was thought to be the obvious next step after Sun announced IA server and PC products. However, Sun has been quiet regarding an IA workstation. Sun may wait to see how emerging Advanced Micro Devices 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 7 November 2003 3
4 Worldwide Workstation Shipments Rebound in Third Quarter Opteron-based workstations fare before announcing intent to produce an IA product. Sun's performance is also likely to be influenced by two other factors. First, Sun is likely to focus on other more strategically important segments of its business, such as servers, as it works to address its financial performance issues. Second, as a result of those financial issues, buyer confidence may have diminished. Gartner Dataquest Perspective In the third quarter, any large growth rates were largely because of IA-based systems. Except for IBM, shipments from all other RISC-based system vendors are either in decline or simply holding their ground. Dell's ability to bounce back after poor second-quarter results and HP's ability to grow unit shipments are leading indicators of this trend. High-end PCs caused little, if any, erosion of the workstation numbers. Vendors clearly are articulating the benefits of a branded workstation over simplyahigh-endpctoitspenders,whohavebeenreluctanttomake purchases. The fact that buyers are more concerned with the certification and services that accompany a workstation purchase than just saving a few dollars by going with a PC bodes well for the market. Vendors would be well served by continued messaging on this issue. Table 2 shows historical workstation market growth rates. Table 2 Worldwide Workstation Market Growth Rates, 3Q99-3Q03 Worldwide Growth (%) 3Q99 10.7 4Q99 9.7 1999 8.2 1Q00 16.7 2Q00 4.5 3Q00 13.5 4Q00 2.2 2000 8.9 1Q01-4.8 2Q01-13.0 3Q01-17.4 4Q01-6.2 2001-10.4 1Q02-4.7 2Q02 3.0 3Q02 1.4 4Q02-4.1 2002-1.2 1Q03 3.9 2Q03 0.7 3Q03 9.9 Source: Gartner Dataquest (November 2003) 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 7 November 2003
5 Key Issue Who are the key players in each computing hardware platform market, and what are their rankings? 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 7 November 2003
6 Worldwide Workstation Shipments Rebound in Third Quarter This document has been published to the following Marketplace codes: HARD-WW-DP-0589 For More Information... In North America and Latin America: +1-203-316-1111 In Europe, the Middle East and Africa: +44-1784-268819 In Asia/Pacific: +61-7-3405-2582 In Japan: +81-3-3481-3670 Worldwide via gartner.com: www.gartner.com Entire contents 2003 Gartner, Inc. and/or its Affiliates. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. 118314