News

Worldwide Server Revenues Down in 2Q

Worldwide server revenues decreased more than 30 percent in the second quarter of 2009 compared with last year's second quarter, according to a report announced last week by IDC.

Both x86 and non-x86 servers took a hit as customers for all types of servers continue to defer refresh activities, according to the Framingham, Mass.-based advisory group. The 30 percent drop to $9.8 billion is the worst ever year-over-year result since the firm began publishing its Worldwide Quarterly Server Tracker report.

"There are a number of things affecting the market," said Jed Scaramella, senior analyst at IDC's Datacenter and Enterprise Server Group, in a telephone interview. "The economy has been brutal for some customers, and with IT budgets flat or slashed, they are putting off any unnecessary buying."

Virtualization of servers and software is also playing a roll in the decline in physical server units being purchased, Scaramella noted.

The x86 server-unit segment, considered the bellwether for the server market, outperformed non-x86 servers (including RISC, EPIC and CISC processors) for the first time in the past six quarters, according to the report. This may signal stabilization in the market, according to Scaramella.

"The x86 is such a significant part of the market that it adjusts at higher velocity than the market for larger servers," Scaramella said. "They are the first to decline when the market goes down, and they are the first to come back when the market comes back, so I think we are seeing signs of a recovery."

The deceleration of server shipments during the past four quarters -- the worst since 2005 -- means that the installed base is "aging rapidly," according to the report. The report expects that for the next business cycle, customers will be focused on refreshing their server units.

The demand for new servers is sometimes driven by new processors and, to a lesser extent, new operating systems.

"I don't think people rush out to refresh servers when a new operating system is released, but some will make refresh decisions based on new processors," Scaramella said. "With new server CPUs from AMD (Istanbul) and Intel's Nehalem chip recently introduced, the refresh cycle should see some improvement."

He noted that there may even be a slight slowdown in that cycle while customers review Windows 7 and Windows Server 2008 R2.

In the meantime, all segments of the server market are in decline.

In the overall server market, IBM led but still had a decline in server revenue of 26.3 percent year over year in the second quarter. HP's server revenue was down 30.4 percent, and Dell's was down 26.8 percent, according to the report. 

In the x86 space, HP held on to a 36.9 percent revenue share of the server market, followed by Dell with 23.7 percent and IBM with 17.5 percent. However, all server vendors had a year-over-year declines in revenues, according to the report. IBM actually made inroads in this space during the reporting period, gaining 1.4 points of market share from the competitors.

Microsoft Windows Server revenues, the largest segment of spending worldwide, were down 27.7 percent in the second quarter, year over year. Linux and UNIX server revenues were also down 13.8 percent and 30.9 percent, respectively, in the same time frame.

Blade servers account for 11.7 percent of quarterly server revenues. Still, the revenue for this segment fell 12.1 percent year over year. Blade server market leaders include HP, IBM and Dell, according to IDC.

About the Author

Herb Torrens is an award-winning freelance writer based in Southern California. He managed the MCSP program for a leading computer telephony integrator for more than five years and has worked with numerous solution providers including HP/Compaq, Nortel, and Microsoft in all forms of media.

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