Changewave Research: PC and Server Trends

ChangeWave Research: PC and Server Trends

ChangeWave Research Report:

Corporate PCs and Servers – 2004 Trends

PC Demand Surges; Server Growth More Modest; Dell Still Dominates

Overview

For the past two years, our ChangeWave Alliance surveys on corporate PC and server demand have consistently shown Dell gaining market share. But are any cracks appearing in its commanding position? What factors are driving corporate PC/Server spending for 2004? And which companies stand to win or lose in the marketplace?

These and other issues were the focus of a January 13-19,2004 survey of Alliance members involved in or knowledgeable about the purchase of PCs and Servers for their company. A total of 659 members participated. Here’s what we found:

Key Findings

A. Personal Computer Sales LeapDue to Urgent Need for Replacement

Sizzling PC Demand. Forty percent(40%) of respondents said their companies intend to purchase more PCs in 1st Quarter 2004 than the previous quarter – a huge 67% gain since we last asked this in August 2003. Only 6% of respondents said their companies intend to buy fewer PCs in the 1st Quarter.

Replacement Cycle Kicking Into High Gear. The long wait is over. Nearly half (45%) of all respondents say the primary factor driving their corporate PC purchasing decisions is their “existing computers must be replaced.”

Dell Maintains its Lead – HPQ and IBM Inch Up. Dell continues to sell PCs to the same commanding 58% share of the corporate PC market it was selling to last August. Hewlett-Packard (HPQ) has gone up three percentage points since last August and now sells to 25% of the market; third place IBM saw a gain of two percentage points to 17%.

Momentum Remains With Dell. Who will be gaining and losing the most PC market share this year in respondents' companies? Once again, Dell (net +38) is alone in the plus column. IBM and HPQ scored net -4 and net -5 respectively – and are barely making progress in the market share battle.

Shift From Desktops to Laptops Will Accelerate in 2004.An exceptionally high 48% of respondents said their company will increase the number of laptops purchased vs. desktops in 2004; only 4% will purchase less laptops vs. desktops.

B. Server Sales Growing Modestly

Corporate Server Market. One-quarter (25%) of respondents report their companies are purchasing more servers in the 1st Quarter than the previous quarter – a 16% improvement since last August. Only5% say they are purchasing less. While these findings are modestly upbeat, they pale in comparison to the torrid findings for corporate PCs.

Dell Maintains Server Leadership.One-in-three respondents (32%) say their companies plan to purchase Dell servers this year, 18% report HPQ, 17% Sun Microsystems and 14% IBM – a mirror of the results from our August survey.

Market Momentum Also With Dell – HPQ Shows Slight Improvement. Which companies stand to gain and lose server market share this year? Dell (net difference score = +20) still holds a big lead over all other players. Also,by an 18% to 5% margin, respondents see the demand for Dell servers within their company increasing during the next six months. In comparison, Hewlett-Packard’s net difference score has improved (from -8 in August to -1 currently), but it still lags far behind Dell. Similarly, only 9% of respondents see more demand for HPQ servers within their company in the next six months, and 13% see less demand.

C. Overall Corporate Demand for Products/Services – Dell Way Out Front

Overall corporate demand for Dell is up for our fourth survey in a row, with 35% of respondents now expecting more demand for Dell within their companies over the next six months and only 9% expecting less. Moreover, Dell’s strong satisfaction rating remains unchanged, with 68% "Very" or "Somewhat Satisfied” with their products/services and only 7% “Unsatisfied.”

Still far back in second place, HPQ has nonetheless experienced an improvement in overall corporate demand since our last survey, with 14% now seeing more demand for HPQ products/services within their companies over the next six months (a two percentage point increase), and 18% seeing less. HPQ satisfaction levels have also improved modestly, with 53% of respondents now "Very" or "Somewhat Satisfied” with the company and 11% “Unsatisfied” (down from 16% last August).

Bottom Line: The 1st Quarter of 2004 will see the largest increase in corporate PC purchasing of the last four years, and a continuing shift from desktops to laptops. Corporate server sales will also improve, but at a more modest rate. Dell will continue to take share in both personal computers and servers; HPQ remains a distant second but is showing earlysigns of improvement for the 1st quarter and for the year.

The ChangeWave Alliance is a group of 4,000 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 ™

Table of Contents

Summary of Key Findings...... 4

Introduction...... 4

The Findings...... 5

Personal Computers...... 6

Servers...... 8

Overall Products and Services – Dell vs. HPQ...... 11

Laptops...... 12

ChangeWave Research Methodology...... 16

About ChangeWave Research...... 17

I. Summary of Key Findings

Introduction

These and other issues were the focus of a January 13-19, 2004 survey of Alliance members involved in or knowledgeable about the purchase of PCs and Servers for their company. A total of 659 members participated. The findings focus on 4 key areas:

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 1st Quarter compared to the last quarter?

Current Survey
Jan ‘04 / Previous Survey
Aug ‘03
Yes, we are planning to purchase more personal computers in the 1st Quarter than last quarter / 40% / 24%
Yes, we are planning to purchase fewer personal computers in the 1st Quarter than last quarter / 6% / 9%
No, there has been no change in personal computer spending plans in the 1st Quarter compared to last quarter / 48% / 63%
Don’t Know/NA / 6% / 3%

Sizzling PC Demand. Forty percent(40%) of respondents said their companies intend to purchase more PCs in 1st Quarter 2004 than the previous quarter – a huge 67% gain since we last asked this in August 2003. Only 6% of respondents said their companies intend to buy fewer PCs in the 1st Quarter.

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

A general improvement in business conditions and capital budgets / 17%
Existing computers must be replaced / 45%
New technology is accelerating replacement of existing computers / 15%
None of the Above / 17%
Don't Know/No Answer / 6%

Replacement Cycle Kicking Into High Gear. The long wait is over. Nearly half (45%) of all respondents say the primary factor driving their corporate PC purchasing decisions is their “existing computers must be replaced.”

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

Dell Maintains its Lead – HPQ and IBM Inch Up. Dell continues to sell PCs to the same commanding 58% share of the corporate PC market it was selling to last August. Hewlett-Packard (HPQ) has gone up three percentage points since last August and now sells to 25% of the market; third place IBM saw a gain of two percentage points to 17%.

(4) 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
Jan ‘04 / Previous Survey Aug ‘03 / Previous Survey Apr ‘03
Dell / 48% / 46% / 49%
HPQ / 16% / 14% / 15%
IBM / 9% / 9% / 9%
Generic White Box / 6% / 8% / 8%
Apple / 3% / 3% / 3%
Gateway / 2% / 2% / 2%
Not Purchasing PCs during 2004 / 8% / 8% / 9%
Don’t Know / 11% / 8% / 6%

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

Net Difference Score – Current Survey (Jan. ’04)

Gain Market Share / Lose Market Share / Net Difference Score
Dell / 48% / 10% / +38
Apple / 3% / 6% / -3
IBM / 9% / 13% / -4
HPQ / 16% / 21% / -5
Generic White Box / 6% / 11% / -5
Gateway / 2% / 15% / -13

Net Difference Score Comparison – Jan. 2004 Survey vs. Aug. 2003 Survey vs. Apr. 2003 Survey

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

Momentum Remains With Dell. Who will be gaining and losing the most PC market share this year in respondents' companies? Once again, Dell (net +38) is alone in the plus column. IBM and HPQ scored net -4 and net -5 respectively – and are barely making progress in the market share battle.

B.Servers

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

Current
Survey
Jan ‘04 / Previous
Survey
Aug ‘03
Yes, we are planning to purchase more servers in the 1st Quarter than last quarter / 25% / 21%
Yes, we are planning to purchase fewer servers in the 1st Quarter than last quarter / 5% / 8%
No, there has been no change in server spending plans in the 1st Quarter compared to last quarter / 54% / 53%
Don't Know/NA / 15% / 17%

Corporate Server Market. One-quarter (25%) of respondents report their companies are purchasing more servers in the 1st Quarter than the previous quarter – a 16% improvement since last August. Only 5% say they are purchasing less. While these findings are modestly upbeat, they pale in comparison to the torrid findings for corporate PCs.

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

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

Dell Maintains Server Leadership. One-in-three respondents (32%) say their companies plan to purchase Dell servers this year, 18% report HPQ, 17% Sun Microsystems and 14% IBM – a mirror of the results from our August survey.

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

Current
Survey
Jan ‘04 / Previous
Survey
Aug ‘03 / Previous
Survey
Apr ‘03
Dell / 27% / 33% / 32%
HPQ / 12% / 12% / 13%
IBM / 9% / 10% / 10%
Sun Microsystems / 6% / 9% / 9%
Generic White Box / 4% / 7% / 7%
Gateway / 0% / 0% / 0%
Not Purchasing Servers during 2004 / 20% / 11% / 11%
Don’t Know / 22% / 20% / 17%

(4) Question Asked: Which of the following vendor(s) is losing server market share in your company this year? (Check All That Apply)

Current
Survey
Jan ‘04 / Previous
Survey
Aug ‘03 / Previous
Survey
Apr ‘03
HPQ / 13% / 20% / 17%
Sun Microsystems / 13% / 13% / 12%
IBM / 8% / 9% / 13%
Dell / 7% / 8% / 7%
Gateway / 5% / 8% / 7%
Generic White Box / 4% / 5% / 6%
Not Purchasing Servers during 2004 / 19% / 11% / 12%
Don’t Know / 33% / 31% / 29%

Net Difference Score – Current Survey (Jan. ’04)

Gain Market Share / Lose Market Share / Net Difference Score
Dell / 27% / 7% / +20
IBM / 9% / 8% / +1
Generic White Box / 4% / 4% / 0
HPQ / 12% / 13% / -1
Gateway / 0% / 5% / -5
Sun Microsystems / 6% / 13% / -7

Net Difference Score Comparison – Jan. ‘04 Survey vs. Aug. ’03 Survey vs.

Apr. ‘03 Survey

Current Survey
Net Difference Score
Jan ‘04 / Previous Survey
Net Difference Score
Aug ‘03 / Previous Survey
Net Difference Score
Apr ‘03
Dell / +20 / +25 / +25
IBM / +1 / +1 / -3
Generic White Box / 0 / +2 / +1
HPQ / -1 / -8 / -4
Gateway / -5 / -8 / -7
Sun Microsystems / -7 / -4 / -3

Market Momentum Also With Dell - HPQ Shows Slight Improvement. Which companies stand to gain and lose server market share this year? Dell (net difference score = +20) still holds a big lead over all other players. In comparison, Hewlett-Packard's net difference score has improved (from -8 in August to -1 currently), but it still lags far behind Dell.

(5) A Closer Look at Server Demand: Dell vs. HPQ

(5a) Question Asked: Within your own company do you see more demand for Dell servers over the next 6 months, less demand, or no demand at all in comparison to the previous 6 months?

More Demand in Next 6 Months / 18%
Same Demand in Next 6 Months / 19%
Less Demand in Next 6 Months / 5%
No Demand in Next 6 Months / 35%
Don't Know/NA / 23%

More Demand for Dell Servers. By an 18% to 5% margin, respondents see the demand for Dell servers within their company increasing during the next six months. Nineteen percent (19%) of respondents see demand remaining the same.

(5b)Question Asked: Within your own company do you see more demand for Hewlett-Packard (HPQ) servers over the next 6 months, less demand, or no demand at all in comparison to the previous 6 months?

More Demand in Next 6 Months / 9%
Same Demand in Next 6 Months / 12%
Less Demand in Next 6 Months / 13%
No Demand in Next 6 Months / 41%
Don't Know/NA / 25%

Weaker Demand for HPQ Servers. Only 9% of respondents see more demand for HPQ servers within their company in the next six months, and 13% see less demand. Twelve percent (12%) of respondents see no change in demand.

C. Overall Products and Services – Dell vs. HPQ

(1) Question Asked: Within your own company do you see more demand for Dell products and services over the next 6 months, less demand, or no demand at all in comparison to the previous 6 months?

Current Survey
Jan ‘04 / Previous
Survey
Aug ‘03 / Previous
Survey
Apr ‘03 / Previous
Survey
Apr ‘02
More Demand in Next 6 Months / 35% / 31% / 26% / 22%
Same Demand in Next 6 Months / 25% / 27% / 31% / 33%
Less Demand in Next 6 Months / 9% / 11% / 11% / 10%
No Demand in Next 6 Months / 22% / 25% / 25% / 25%
Don't Know/NA / 9% / 5% / 7% / 10%

Demand for Dell Continues to Rise. Overall corporate demand for Dell is up for our fourth survey in a row, with 35% of respondents now expecting more demand for Dell within their companies over the next six months and only 9% expecting less.

(1a) Question Asked: How satisfied is your company with Dell products and services?

Current Survey
Jan ‘04 / Previous
Survey
Aug ‘03 / Previous
Survey
Apr ‘03 / Previous
Survey
Apr ‘02
Very Satisfied / 40% / 40% / 39% / 38%
Somewhat Satisfied / 28% / 29% / 30% / 27%
Somewhat Unsatisfied / 5% / 6% / 5% / 4%
Very Unsatisfied / 2% / 2% / 3% / 1%
Don't Know/NA / 24% / 23% / 22% / 30%

Dell's Satisfaction Levels Remain Strong. Dell's strong satisfaction rating remains unchanged, with 68% "Very" or "Somewhat Satisfied" with their products/services and only 7% "Unsatisfied."

(2) Question Asked: Within your own company do you see more demand for HPQ products and services over the next 6 months, less demand, or no demand at all in comparison to the previous 6 months?

Current Survey
Jan ‘04 / Previous
Survey
Aug ‘03 / Previous
Survey
Apr ‘03
More Demand in Next 6 Months / 14% / 12% / 12%
Same Demand in Next 6 Months / 20% / 18% / 20%
Less Demand in Next 6 Months / 18% / 21% / 18%
No Demand in Next 6 Months / 35% / 37% / 37%
Don't Know/NA / 13% / 12% / 13%

HPQ Server Demand Shows Modest Improvement. Still far back in second place, HPQ has nonetheless experienced an improvement in overall corporate demand since our last survey, with 14% now seeing more demand for HPQ products/services within their companies over the next six months (a two percentage point increase), and 18% seeing less.

(2a) Question Asked: How satisfied is your company with HPQ products and services?

Current Survey
Jan ‘04 / Previous
Survey
Aug ‘03 / Previous
Survey
Apr ‘03
Very Satisfied / 22% / 18% / 19%
Somewhat Satisfied / 31% / 32% / 28%
Somewhat Unsatisfied / 8% / 13% / 10%
Very Unsatisfied / 3% / 3% / 2%
Don't Know/NA / 36% / 35% / 39%

HPQ Customers – Getting Satisfaction? HPQ satisfaction levels have also improved modestly, with 53% of respondents now "Very" or "Somewhat Satisfied" with the company and 11% "Unsatisfied" (down from 16% last August).

D. Laptops

(1) Question Asked: Finally, last year saw an uptick in laptop sales. Do you see a shift towards laptops occurring within your company in 2004?

Yes, we are increasing the number of laptops being purchased compared to desktops in 2004 / 48%
No, we are maintaining the same product mix we purchased in 2004 / 41%
No, we are reducing the number of laptops being purchased compared to desktops in 2004 / 4%
Don't Know / 8%

Shift From Desktops to Laptops Will Accelerate in 2004.An exceptionally high 48% of respondents said their company will increase the number of laptops purchased vs. desktops in 2004; only 4% will purchase less laptops vs. desktops.

(1a) Question Asked: Please elaborate.

Sampling of Alliance Member Responses

A. Yes, We are Increasing the Number of Laptops Being Purchased Compared to Desktops in 2004 (48%)

1. Laptops Provide Portability/Mobility/Versatility/Wireless Capability

SMU3129 writes, “Even though the cost is more, the laptop provides more flexibility than desktop, especially now when more people want the ability to work from home and have the laptop available when traveling.”

SAU3923 writes, “In our office we have over 250 people working in this building - 3 years ago - we had 20% Laptop (mostly Managers) - 80% Desktop. As of today the Laptops are nearly 100%...Laptops have become faster, lighter and enable us to use the same machine - in off hours - mostly work from home...”

TAR8008 writes, “Allows software development/testing during commute.”

JOH8201 writes, “Laptops are simply more versatile than desktops, and there is not a significant degradation in function when purchasing a laptop versus desktop as there was in the past. Many professionals are mobile and need access when traveling; even those who travel infrequently value the ability to bring their system to a conference room or take it home to do useful work. It's hard to justify why someone needs a stationary desktop anymore...”

KAR2836 writes, “Profiles of roles & responsibilities of staff are changing with the industries and work environment. The PC technology required must meet an increasing demand for mobility, connectivity, cross-platform compatibility, open-source (for upgrades and peripherals interfaces), quality & robustness.”

JRE7492 writes, “With laptops and wireless access we have established a more mobile office with locations freely changed with no IT involvement.”

CA2935 writes, “With Wi-Fi, productivity is higher for laptops then desktops. People work anywhere in the building they want and then get the ability to take it out of the office also.”

2. Low Price