Xserve shipments soar 119 percent; trend likely to continue

Shipments of Apple Computer Inc.'s Xserve 1U rackmount server soared in the third quarter of 2004, growing 119 percent over the same period last year, according to a report by market research form Gartner Dataquest. Analysts expect triple digit growth for the Xserve could continue into 2006 before it levels off.

"It's pretty significant for us because we're in the top ten of the entry level server market, which is really the bulk of where all servers are sold," Alex Grossman, Apple director of product management, server hardware, told MacCentral.

Of the top ten companies listed in the report, Apple achieved the highest level of growth with Dell coming in at 25 percent in second place. In overall unit shipments, the top ten list is as follows: HP, Dell, IBM, Sun, Fujitsu, NEC, Acer, Apple, Legend and LangChao.

"It's a good product and it will show good growth," said John Enck, an analyst at Gartner Dataquest. "They [Apple] should have aggressive growth into 2006 and that's when they'll start to see more conservative growth of 20-30 percent instead of the triple digit ones."

Both Apple and Gartner agree that most of the Xserves are being sold in areas that are not new to Apple technology. While Apple says that traction in their core markets is strong, they are also seeing more interest from the mid-range supercomputer as well as small business. It is these areas that Apple feels they are seeing the bulk of their growth.

While Enck agrees that the supercomputer market can supply growth to server companies, he cautions that it won't be an easy win for anyone.

"Everybody is looking to that segment as a high growth rate area -- it's a very competitive part of the market," said Enck. "Apple has some technological advantages in terms of the cooling and processor technology, but it remains a dog-eat-dog market."

Server tools make a difference

In recent years, Apple has focused on their GUI (Graphical User Interface) tools, making more than just command line equivalents for traditional UNIX users. While many hardcore server users may tend to stick with the command line, the GUI tools have added to Apple's arsenal, allowing them to attract more market segments.

"A lot of people are even starting to use ARD [Apple Remote Desktop] to manage desktops -- it's becoming more prevalent than it was even a couple of years ago," said Apple's Grossman. "I think it's because in the past a lot of the GUI tools they were used to didn't work very well remotely and the tools were really just a GUI equivalent of the command line. There wasn't a lot of time saving.

In contrast, Grossman said that Apple has combined a lot of functionality of the tools in one button. So, instead of just being a command line equivalent, when you push a button several different things will happen, making the setup and maintenance of the server easier and more efficient.

"That's the opportunity that Apple has here is to start to position the value add that they have in the box with Panther against Linux and Windows. They just seem reluctant to that," said Gartner's Enck.

Xserve marketing

While Apple aggressively markets its consumer products, the Xserve and other server products don't receive the same spotlight. Despite the reluctance to market the product aggressively Enck sees some growth opportunities if Apple broadens it's campaign.

"They are being very conservative in the marketing of this [Xserve], said Enck. "They are doing a good job of controlled marketing, which helps explain why their own users are buying it the most, but if they were to reposition it as a more general purpose enterprise or data center device, then they would have some more growth opportunity."

For its part, Apple is trying to make sure their markets are covered and still take advantage of new opportunities. The next release of Mac OS X, codenamed Tiger, will see some changes that will help the company go some new directions.

"We are still focused on our core markets because we care about those more than anything, but we are also trying to meet the requirements of the small and medium size businesses," said Grossman. "Some of the things you will see in Tiger server are really driven by us going out into different markets."

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