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A SPECIAL ANNEX NEWSFLASH

Spinning the Server Market Share News

And the Winner Is...

...Who Do You Want It To Be?

PHOENIX, Nov 29 - "Mirror, mirror on the wall, who is the fairest of them all?"  When it comes to IT server markets, the answer to this famous line from the "Snow White" fairy tale depends on who is spinning the news and holding the mirror... 

"Market Research Firm States IBM Expands Lead as Number One Server Vendor in the World," read the headline of a November 25 IBM press release about an International Data Corporation (IDC) market research report.

"HP No. 1 in Worldwide Server Shipments for Sixth Consecutive Quarter," shouted the Hewlett Packard PR people in a press release published the same day about the same IDC report.

How can that be?  How can two firms claim the No. 1 position?  Who is really the "fairest of them all" in the global server market?  

When worldwide rankings are announced, we have become accustomed to getting a definitive answer to the line - "...and the winner is..." 

Well, that may be true in Hollywood.  But in the quarterly "Server Snow White" beauty contests, crisp answers can be elusive and buried between the lines.  For, both IBM and HP are technically correct in claiming superiority over each other. 

To see how that's possible, check out the following claims made by the two computer industry leaders' marketing web spinners.  To help you along, we'll drop a few hints by highlighting in italics some clues in the two vendor releases.

Claim 1, Overall Market- IBM Release

International Data Corporation (IDC) reported today that IBM has retained its position as the number one server vendor in the world for the third quarter of 2003, with 31.1 percent share based on factory revenue...  In overall servers, IBM gained 1.4 point of worldwide revenue share year-to-year in the third quarter.

Claim 1, Overall Market - HP Release

For the sixth consecutive quarter, HP (NYSE:HPQ - News) leads in worldwide server unit shipments, with 30.6 percent of the market, according to figures released today by IDC.

Claim 1 - Truth

The truth is that both claims are correct.  Both Server Snow Whites are the "fairest of them all."  It's just that IBM is the leader in absolute server revenues, while HP claims the top spot in unit shipments.  Welcome to the art of news-spinning.

Claim 2, UNIX Market - IBM Release

IDC reports that in UNIX® servers, IBM gained 2 points of worldwide share in the third quarter year-to-year and grew revenue 4.5 percent.

Claim 2, UNIX Market - HP Release

HP also retook the No. 1 position in worldwide UNIX server revenue, driven by its HP9000 and Integrity server lines... HP's commanding lead in UNIX servers, with 33.8 percent share of market revenue, is driven by its No. 1 position in high-end and midrange UNIX server revenue worldwide. 

Claim 2 - Truth

HP is clearly the "fairest of them all" in the UNIX market - in absolute revenue market shares. (Notice how HP also stresses absolute revenue shares here, just like IBM did in Claim 1, not unit shipments).  IBM marketing news-spinners, on the other hand, emphasize their short-term (quarterly) market share gain.

Claim 3, x86 Market - IBM Release

In the sale of x86 servers, IBM gained .7 point of worldwide share year-to-year, and grew revenue 16 percent, significantly outpacing HP in terms of revenue growth.

Claim 3, x86 Market - HP Release

In addition to continuing its longstanding lead in the worldwide x86 server market with the HP ProLiant line, HP retook the No. 1 position in x86 server revenue in the United States, with 32 percent market share. 

Claim 3 - Truth

IBM seems to be the "fairest of them all" in the third quarter x86 (PC) market revenue growth.  Which is why HP news-spinners are emphasizing their long-term absolute position among the Intel-based PCs, but also their growth gain in the domestic PC market.  

Claim 4, Linux Market - IBM Release

In Linux servers, IBM grew its revenue share by 0.8 points of share year-to-year, while HP and Dell both lost share year-to-year. IBM grew revenue year-to-year by 56.5 percent in Linux servers.

Claim 4, Linux Market - HP Release

HP is No. 1 in worldwide revenue and shipments for Linux servers, leading its nearest competitor by almost 9 percentage points in Linux revenue market share.

Claim 4 - Truth

Once again, HP claims here the advantages of an incumbent, stressing its absolute position as the No. 1 in both revenues and unit shipments for Linux servers.  What HP doesn't say, the Big Blue news-spinners supplement... that IBM outgrew both HP and Dell in the latest quarter.

Claim 5, Blade Server Market - IBM Release

In one of the hottest server segments, blade servers, IDC reports that IBM took a number one revenue share position with 34.8 percent of worldwide blade server share. At the same time, IBM also leads in worldwide blade shipments with 34.5 points in the third quarter.

Claim 5, Blade Server Market - HP Release

In the fastest growing server segment, HP increased its ProLiant blade server shipments 168.3 percent year-over-year and recently announced it has shipped more than 50,000 blade servers to date.

Claim 5 - Truth

In the fastest growing server segment, HP increased its ProLiant blade server shipments 168.3 percent year-over-year and recently announced it has shipped more than 50,000 blade servers to date.

Summary

So now that you've had a chance to hold up the mirror, who, do you think, is the "fairest of them all" in the global server market?  Tough question, isn't it?  "Who do you want it to be?", might be an appropriate answer.  For, in the world of marketing web spinning, the truth often lies in the eyes of the beholder... you!

If there is one lesson a computer buyer can draw from our version of the global market share "trivial pursuit" game, it is: You'd better use several sources.  And learn to read them carefully, between the lines, before making your final Server Snow White call.    

Lest you prefer to live in the land of fairy tales... like those members of the American public who base their political opinions on the mainstream U.S. media reports that regurgitate the White House press releases.

Of course, there is always the alternative of the indignant ostrich: "Ignore all press releases.  Ignorance is bliss.  Fly strictly by the seat of your pants."  J

Until they wear out, of course.  Ouch!

 Happy bargain hunting!

Bob Djurdjevic

For additional Annex Research reports, check out... 

2003 IBM:  “Small Is Now Big at Big Blue” (Oct 16),  “On the Nose But No Cigar” (July 16), “A Paler Shade of Blue” (June 2), “Save, Spend and Split” (May 8), “Shrunk by the Marketplace” (Apr 17), “Turnaround Continues...” (Apr 15), “Start of a Real Turnaround?” (Jan 17).

2003 HP: "An HP Hat Trick (March 2003);   EXCERPTS - Analysis of Hewlett Packard Services FY02 results (May 2003);  2003 Global IT Services Heptathlon (May 23, 2003)Analysis of “Top 10” IT Leaders’ Market and Business (June 2003)

2002 IBM: “Gerstner: The Untold Story”  (Dec 27), "Gerstner Spills the Beans" (Dec 13), "On a Wing and a Prayer" (Oct 21), "IBM-PwC Tie the Knot" (Oct 2), "Half or Double Trouble?" (Aug 12), Wall Street/Main Street Chasm (June 25), “Wall Street Casino,” (June 21), Big Blue Salami (June 19), "Looming IBM Layoffs" (May 14), "IBM 5-Yr Forecast: From Here to Eternity?" (Apr 2002),  “Tough Times, Soft Deals,” (Apr 25, 2002), “Gerstner’s Legacy: Good Manager, Poor Entrepreneur” (Jan 2002), IBM Pension Plan Vapors: Where Did $17 Billion Go? (Mar 2002), "Sir Lou OutLayed Lay!" (Apr 1, 2002).

A selection from prior years: Is IBM Cheating on Taxes, Annex Bulletin 99-17 (May 1999),  IBM 5-year Forecast 2001: An Unenviable Legacy (June 2001) "Break Up IBM!" (Mar. 1996), Fortune on IBM (June 15, 2000), “Smoke and Mirrors Galore,” July 2000), "Slam Dunk of Bunk" (Jan 2000), Annex Bulletin 98-14 ("Wag the Big Blue Dog"), Armonk's Fudge Factory (Apr. 9, 1999)Where Armonk Meets Wall Street, Greed Breeds Incest (November 1998)Stock Buybacks Questioned: Is IBM Mortgaging Its Future Again?, 97-18 (4/29/97),  "Some Insiders Cashed In On IBM Stock's Rise, Buybacks" 97-22, 7/27/97,  Djurdjevic’s Forbes column, "Is Big Blue Back?," 6/10/97;  “Executive Suite: How Sweet!,” (July 1997), "Gerstner: Best Years Are Behind", Aug. 10, 1999), "IBM's Best Years Are 3-4 Decades Behind Us" (July 1999), "Lou's Lair vs. Bill's Loft" (June 1999),  "Corporate Cabbage Patch Dolls," 98-39, 10/31/98; Djurdjevic’s Chronicles magazine October 1998 column, "Wall Street Boom; Main Street Doom", “Louis XIX of Armonk,” (Aug. 1996), "Mountain Shook, Mouse Was Born" (Mar. 25, 1994), “A Nice Guy Who Lost His Compass” (Jan 26, 1993), “Akers: The Last Emperor?” June 1991), Industry Stratification Trend (Mar. 30, 1990) etc.]

Or just click on and use "financial engineering" or similar  keywords.

 






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Volume XIX, Annex Newsflash No. 2003-11
November 29, 2003

Editor: Bob Djurdjevic
Published by Annex Research, Inc.
e-mail: annex@djurdjevic.com

P.O. Box 97100, Phoenix, Arizona 85060-7100
TEL/FAX: (602) 824-8111

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