Systems vendors feel the downturn

Technology buyers are clearly keen to focus on their existing investments in hardware while budgets are tight. Consequently there was no sign of revenue growth at any of the systems vendors reporting financial results this month.

PC and low-end server vendor Gateway was worst hit – revenues for its third quarter dropped 21% to $1.1 billion, from more than $1.4 billion for the same quarter of 2001. Gateway’s poor year-on-year performance led some financial analysts to question whether disappointing sales in the run-up to Christmas – traditionally one of the strongest selling periods for PC vendors – will force the company to take drastic restructuring measures. However, Gateway did record its second consecutive quarter of sequential revenue growth, suggesting it may prove the analysts wrong.

Faced with the decline in hardware spending, IBM has already taken action to try and stimulate new sales. In October 2002, it announced it was to offer cheap financing deals in a bid to win new customers. Mid- to large-sized organisations will be able to acquire hardware from IBM with a payment holiday of 90 days. However, hardware sales during the company’s third quarter declined by 2%, contributing to zero overall revenue growth, and indictating IBM needs to revive sales one way or another.

The story at server vendor Sun Microsystems was similarly disappointing. Sun says it will cut around 10% of its workforce after reporting a net loss of $111 million during the first quarter of its financial year. The decline highlights how more organisations are favouring less expensive, Intel-based systems over Sun’s servers, which are based on its proprietary Sparc processors.

Cost-cutting measures at server vendor Unisys seem to be working, however. Despite a 3% decline in sales during its third quarter, the company reported an impressive increase in profit – from $20.9 million in the third quarter of 2201 to $59.0 million in its latest quarter.

Systems vendors
Company   Activity   Period   Period end   Revenue ($m)   Rev change   Net inc ($m)   Prev net inc ($m)  
Gateway Inc PCs &servers 3Q02 30-Sep 1,117.8 -21% -46.9 -519.7
IBM Corp Systems, software &IT services 3Q02 30-Sep 19,821.0 0% 1,313.0 1,595.0
Sun Microsystems Inc Workstations, servers, web s/w 1Q03 29-Sep 2,747.0 -4% -111.0 -180.0
Unisys Corp Systems &services 3Q02 30-Sep 1,332.3 -3% 59.0 20.9

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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