Changewave Research: PC and Server Trends

ChangeWave Research: PC and Server Trends

ChangeWave Research Report:

Corporate PCs and Servers – 2004 Outlook

2Q PC Demand Levels Off; Server Growth Modest;

Dell Maintains Lead; Microsoft NT Fights Off Linux

Overview

In January 2004, the ChangeWave Alliance’s Corporate PC & Server purchasing survey showed 1st Quarter demand surging for PCs, with Dell continuing to gain market share. Corporate server sales were also improving, but at a more modest rate.

During the week of April 13 – 19, 2004, we conducted a follow-up survey of Alliance members involved in or knowledgeable about the purchase of PCs and Servers for their company. A total of 682 members participated. Here’s what we found.

A. Personal Computers

· PC Demand Levels off From Previously Rapid Pace. Thirty-one percent (31%) of respondents said their companies intend to purchase more PCs in 2nd Quarter 2004 than the previous quarter – a 9 percentage point drop from the findings of our previous survey (January 2004).

· PC Replacement Cycle Beginning to Slow. One-in-three respondents (33%) say the primary factor driving corporate PC purchasing decisions is the need to replace existing computers – but that’s a steep drop from the 45% who said this in our previous survey. Interestingly, 22% of respondents said their companies “currently do not need to purchase more PCs.”

· Overall Corporate PC Demand: Dell Continues to Lead. Dell (57%) continues to maintain its dominance over all other vendors, though it’s down a point from our previous survey (Jan 2004). HPQ (22%) fell 3 percentage points since our previous survey, while IBM (17%) experienced no change for the third survey in a row.

· PC Market Share Growth: Dell Still Way Ahead of Pack – But Slowing a Bit. Dell (Net Difference Score = +34) is alone in the plus column in terms of PC market share for the fourth survey in a row, though it has fallen 4 percentage points from the previous survey. IBM and HPQ still trail Dell by a wide margin.

B. Servers

· Corporate Server Market. Twenty-three percent (23%) of respondents report their companies are purchasing more servers in the 2nd Quarter than the previous quarter – a 2-percentage point decline since January 2004. Only 5% say they are purchasing less servers.

· Dell Builds on Server Leadership. Thirty-three percent (33%) of respondents say their companies plan to purchase Dell servers this year, 19% say HPQ, and 15% IBM. All three companies are doing 1-pt. better than in our January 2004 survey.

· The Outlook for Linux. Twenty-nine percent (29%) of respondents’ companies plan to install Linux systems in 2004. But more than half (54%) say their companies have no plans to install Linux this year.

· Microsoft NT Solidifies Server OS Lead. Fifty-three percent (53%) of respondents said Microsoft NT was the primary Operating System used on servers in their company. UNIX/Solaris was chosen by 13%, and Linux by 7%.

C. Overall Products and Services – Dell vs. HPQ

· Demand for Dell Levels off Slightly From Sizzling Pace. Overall corporate demand for Dell continues to be strong, with 30% of respondents now expecting more demand for Dell within their companies over the next six months – although this is a 5-pt. drop since our January 2004 survey. Only 9% expect less demand.

· Dell Satisfaction Remains High. Dell's strong satisfaction rating increased 2 percentage points since our January 2004 survey (70% satisfied Apr ’04 vs. 68% satisfied Jan ’04). Only 8% said they were unsatisfied.

· Slight Dip in HPQ Demand. Still lagging far behind Dell, only 12% see more demand for HPQ products and services within their companies over the next six months (a 2-pt. decrease from our previous survey), and 19% see less demand
(a 1-pt. increase).

· HPQ Satisfaction Remains Unchanged. HPQ satisfaction levels remain unchanged, with 54% of respondents satisfied with the company’s products and services, and 13% unsatisfied.

D. Laptops

· Shift From Desktops to Laptops Maintains Momentum. Forty-seven percent (47%) of respondents said their company will increase the number of laptops purchased vs. desktops in 2004, while only 4% will purchase less laptops.

Bottom Line: The PC market continues to show strength for the 2nd Quarter, but has leveled off in comparison to our January 2004 survey findings. Of note, the Alliance results are in line with recent guidance from Microsoft pointing to slower PC market growth. Furthermore, the corporate server results show a slight slowdown in growth for the 2nd Quarter. Dell continues to maintain a huge overall lead in both the PC and Server markets, while HPQ and IBM trail by wide margins.

The ChangeWave Alliance is a group of 4,500 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

www.ChangeWaveResearch.com

Table of Contents

Summary of Key Findings 4

The Findings 5

A. Personal Computers 5

B. Servers 8

C. Overall Products and Services – Dell vs. HPQ 12

D. Laptops 13

ChangeWave Research Methodology 14

About ChangeWave Research 15

I. Summary of Key Findings

Introduction

· Personal Computers

· Servers

· Overall Products and Services – Dell vs. HPQ

· Laptops

II. The Findings

A. Personal Computers

(1) Question Asked: “Have your company spending plans for personal computers changed in the 2nd Quarter compared to last quarter?”

Current
Survey
Apr ‘04 / Previous
Survey
Jan ‘04 / Previous
Survey
Aug ‘03
Yes, we are planning to purchase more personal computers in the 2nd Quarter than last quarter / 31% / 40% / 24%
Yes, we are planning to purchase fewer personal computers in the 2nd Quarter than last quarter / 9% / 6% / 9%
No, there has been no change in personal computer spending plans in the 2nd Quarter compared to last quarter / 57% / 48% / 63%
Don't Know / 4% / 6% / 3%

PC Demand Levels off From Previously Rapid Pace. Thirty-one percent (31%) of respondents said their companies intend to purchase more PCs in 2nd Quarter 2004 than the previous quarter – a 9 percentage point drop from the findings of our previous survey (January 2004).

Similarly, a total of 9% of respondents said their companies intend to buy fewer PCs in the 2nd Quarter, up from 6% in our previous survey.

(2) Question Asked: “Looking at the following areas, which one is most driving your company's personal computer purchasing decisions?”

Current
Survey
Apr ‘04 / Previous
Survey
Jan ‘04
Existing computers must be replaced / 33% / 45%
A general improvement in business conditions and capital budgets / 19% / 17%
New technology is accelerating replacement of existing computers / 9% / 15%
We currently do not need to purchase more PCs / 22% / NA
A general slowdown in business conditions and capital budgets / 5% / NA
We are waiting for new technology enhancements before replacing existing PCs / 5% / NA
None of the Above / 3% / 17%

PC Replacement Cycle Beginning to Slow. One-in-three respondents (33%) say the primary factor driving corporate PC purchasing decisions is the need to replace existing computers – but that’s a steep drop from the 45% who said this in our previous survey. Interestingly, 22% of respondents said their companies “currently do not need to purchase more PCs.”

(3) Question Asked: “From which of the following vendors is your company purchasing personal computers during calendar year 2004? (Check All That Apply)”

Current
Survey
Apr ‘04 / Previous
Survey
Jan ‘04 / Previous
Survey
Aug ‘03 / Previous
Survey
Apr ‘03
Dell / 57% / 58% / 58% / 60%
HPQ / 22% / 25% / 22% / 23%
IBM / 17% / 17% / 17% / 15%
Generic White Box / 10% / 10% / 13% / 12%
Apple / 4% / 3% / 3% / 6%
Gateway / 2% / 3% / 5% / 4%
Not Purchasing PCs during 2004 / 11% / 8% / 7% / 10%
Don't Know / 3% / 3% / 1% / 1%
Other / 5% / NA / NA / NA

Overall Corporate PC Demand: Dell Continues to Lead. Dell (57%) continues to maintain its dominance over all other vendors, though it’s down a point from our previous survey (Jan 2004). HPQ (22%) fell 3 percentage points since our previous survey, while IBM (17%) experienced no change for the third survey in a row.

(3A) Question Asked: “Which of the following vendor(s) is gaining personal computer market share in your company this year? (Check All That Apply)”

Current
Survey
Apr ‘04 / Previous
Survey
Jan ‘04 / Previous
Survey
Aug ‘03 / Previous
Survey
Apr ‘03
Dell / 45% / 48% / 46% / 49%
HPQ / 14% / 16% / 14% / 15%
IBM / 10% / 9% / 9% / 9%
Generic White Box / 6% / 6% / 8% / 8%
Apple / 3% / 3% / 3% / 3%
Gateway / 1% / 2% / 2% / 2%
Not Purchasing PCs during 2004 / 11% / 8% / 8% / 9%
Don't Know / 10% / 11% / 8% / 6%
Other / 5% / NA / NA / NA

(3B) Question Asked: “Which of the following vendor(s) is losing personal computer market share in your company this year? (Check All That Apply)”

Current
Survey
Apr ‘04 / Previous
Survey
Jan ‘04 / Previous
Survey
Aug ‘03 / Previous
Survey
Apr ‘03
HPQ / 20% / 21% / 22% / 20%
Gateway / 16% / 15% / 14% / 14%
IBM / 12% / 13% / 16% / 15%
Dell / 11% / 10% / 13% / 11%
Generic White Box / 10% / 11% / 9% / 10%
Apple / 5% / 6% / 5% / 7%
Not Purchasing PCs during 2004 / 11% / 8% / 7% / 9%
Don't Know / 20% / 23% / 20% / 18%
Other / 5% / NA / NA / NA

Net Difference Score – Current Survey (April 2004)

Gain Market Share / Lose Market Share / Net Difference Score
Dell / 45% / 11% / +34
IBM / 10% / 12% / -2
Apple / 3% / 5% / -2
Generic White Box / 6% / 10% / -4
HPQ / 14% / 20% / -6
Gateway / 1% / 16% / -15

Net Difference Score Comparison – April 2004 Survey vs. January 2004 Survey vs. August 2003 Survey vs. April 2003 Survey

Current Survey
Net Difference Score
Apr ‘04 / Previous Survey
Net Difference Score
Jan ‘04 / Previous Survey
Net Difference Score
Aug ‘03 / Previous Survey
Net Difference Score
Apr ‘03
Dell / +34 / +38 / +33 / +38
Apple / -2 / -3 / -2 / -4
IBM / -2 / -4 / -8 / -6
Generic White Box / -4 / -5 / -1 / -2
HPQ / -6 / -5 / -8 / -5
Gateway / -15 / -13 / -12 / -12

PC Market Share Growth: Dell Still Way Ahead of Pack – But Slowing a Bit. Dell (Net Difference Score = +34) is alone in the plus column in terms of PC market share for the fourth survey in a row, though it has fallen 4 percentage points from the previous survey. IBM and HPQ still trail Dell by a wide margin.

(3C) Question Asked: “There are big shifts on the horizon in the PC market (e.g., Itanium 64-bit chip, Microsoft's new Longhorn OS, PC Express, etc.). Have you seen any indication of reluctance to purchase PCs in your company because of these coming big shifts?”

Yes / 9%
No / 79%
Don't Know / No Answer / 12%

Major Shifts in PC Market Having Minimal Impact on Corporate Purchases. Four-in-five respondents (79%) report that new developments like Intel’s Itanium chip or Microsoft’s Longhorn OS are having no impact on their corporate PC buying decisions. A total of 9% indicated such shifts are causing a reluctance to purchase PCs in their company.

B. Servers

(1) Question Asked: “Have your company spending plans for servers changed in the 2nd Quarter compared to the last quarter?”

Current
Survey
Apr ‘04 / Previous
Survey
Jan ‘04 / Previous
Survey
Aug ‘03
Yes, we are planning to purchase more servers in the 2nd Quarter than last quarter / 23% / 25% / 21%
Yes, we are planning to purchase fewer servers in the 2nd Quarter than last quarter / 5% / 5% / 8%
No, there has been no change in server spending plans in the 2nd Quarter compared to last quarter / 56% / 54% / 53%
Don't Know / No Answer / 16% / 15% / 17%

Corporate Server Market. Twenty-three percent (23%) of respondents report their companies are purchasing more servers in the 2nd Quarter than the previous quarter – a 2-percentage point decline since January 2004. Only 5% say they are purchasing less servers.

(2) Question Asked: “From which of the following vendors is your company purchasing servers during calendar year 2004? (Check All That Apply)”

Current
Survey
Apr ‘04 / Previous
Survey
Jan ‘04 / Previous
Survey
Aug ‘03 / Previous
Survey
Apr ‘03
Dell / 33% / 32% / 34% / 36%
HPQ / 19% / 18% / 20% / 21%
IBM / 15% / 14% / 14% / 16%
Sun Microsystems / 14% / 17% / 15% / 19%
Generic White Box / 5% / 6% / 7% / 8%
Gateway / 0% / 0% / 1% / 1%
Not Purchasing Servers during 2004 / 23% / 20% / 15% / 14%
Don't Know / 15% / 16% / 16% / 13%
Other / 3% / NA / NA / NA

Dell Builds on Server Leadership. Thirty-three percent (33%) of respondents say their companies plan to purchase Dell servers this year, 19% say HPQ, and 15% IBM. All three companies are doing 1-pt. better than in our January 2004 survey.