System iNetwork

June 1, 2009

Servers Take a 25 Percent Dive, Blades Increase Share

According to the latest numbers from the math-lovin' whizzes at IDC, worldwide server market revenue has taken a 25 percent dive in the first quarter of 2009. As companies buy fewer servers or hold off altogether, the market size dipped to $9.9 billion, which is the lowest quarterly server revenue recorded since IDC began tracking the server market on a quarterly basis 12 years ago. Ouch.

Server unit shipments faired about the same: movement of hardware units dropped 26.5 percent in the first quarter of 2009, as measured against the first quarter of 2008. The year-over-year decline from the fourth quarter of 2008 was 12 percent, so the dive steepened.

Volume (a.k.a. low-end, primarily x86) systems experienced the sharpest decline, with year-over-year revenue slipping 30.5 percent, IDC reports, and while midrange enterprise demand weakened, too, with a year-over-year decline of 13.6 percent, it wasn't as bad as the high-end enterprise segment, which saw revenue dip 19.5 percent. This is only the second time since 2002 that all three server segments have experienced a year-over-year revenue decline in the same quarter.

"Market conditions worsened in all geographic regions during the first quarter as customers of all types pulled back on both new strategic IT projects and ongoing infrastructure refresh initiatives," notes Matt Eastwood, group vice president of Enterprise Platforms at IDC. "Most enterprise organizations are deferring new IT procurements and instead focusing on extending server lifecycles and improving existing asset utilization. IDC believes that while these strategies are effective in the near term, server demand will begin to improve in the second half of the year as customers begin to rebuild their IT capabilities in advance of a meaningful economic recovery in 2010."

IBM in Statistical Tie with HP

HP and IBM jointly held the number 1 position in the worldwide server market in the first quarter, each with 29.3 percent share (IBM gain 1.7 points of share while HP lost 0.7 points). IDC says this bit of growth was driven by a solid performance with IBM's System z and System p server businesses (no doubt, with a bit of unreported IBM i-focused sales tossed into the "converged System p" Power Systems bucket).

Sun and Dell also tied for the number 3 market position: Dell's server revenue declined 31.2 percent year over year to snag 11 percent of the market, while Sun's server revenue declined 25.5 percent year over year, ending with 10.3 percent of the revenue market. Fujitsu/Fujitsu-Siemens trails with 6.7 percent market share.

Non-x86 Servers Gaining, Most Notably Unix-Based

IDC says the market for non-x86 servers, which it defines as servers based on RISC, EPIC, and CISC processors, declined 19.4 percent year over year to $4.8 billion in 1Q09. This is the fifth consecutive quarter that non-x86 servers have out performed x86 servers in the market.

"x86-based volume servers, historically an area of growth for the industry, posted another quarter of significant weakness during the first quarter of 2009," notes Dan Harrington, research analyst in IDC's enterprise server group. "However, while it may be easier for IT departments to suspend purchases of commodity boxes as opposed to more mission critical RISC- or CISC-based servers, IDC expects x86 systems to rebound faster than the overall market in the coming quarters."

IDC doesn't break out IBM i, unfortunately, but interestingly, Unix revenues for the quarter were $3.3 billion, which represents 33.1 percent of server spending. IBM, Sun, and HP pretty closely divide the Unix market into near thirds.

"IDC believes that lengthening server lifecycles in the datacenter, especially for scalable midrange and high-end servers, affected Unix server sales, in terms of declining revenue and unit shipments in the first quarter," says Jean S. Bozman, research vice president, Enterprise Platforms group. "However, their strong contribution as a percent of first quarter worldwide server spend reflects the presence of midrange and high-end systems carrying higher average sales prices (ASVs), and the bifurcation of the market into low-cost and high-end systems, based on specific workloads, such as large corporate databases, transaction processing and business intelligence (BI)."

IBM's System z servers brought in $889 million for the quarter, accounting for 9.0 percent of all server revenue in 1Q09, which is the highest first quarter revenue share for IBM's System z in five years.

Microsoft Windows server revenue was $3.7 billion in 1Q09 (a 28.9 percent year-over-year decline, which still comprises 37.3 percent of all server revenue in the quarter). Linux server revenue comprised 13.8 percent of server revenue in 1Q09, declining 24.8 percent year-over-year to $1.4 billion, its lowest revenue level in five years, IDC reports.

Blades Suffering Less

The blade server market segment decelerated sharply in 1Q09, declining 14.4 percent in revenue, accounting for $1.1 billion in the first quarter.

"Even though the blade market experienced negative growth, the segment still increased its share of revenue of the overall server market," says Jed Scaramella, senior research analyst in IDC's Datacenter and Enterprise Server group. "Customers are seeking IT solutions that reduce expenses and improve efficiencies. The integrated nature of the blade platforms is adept to deliver a dynamic IT infrastructure."

Posted by cmaxcer at June 1, 2009 10:05 AM