News

Worldwide Server Revenues Drop; Windows Flops Too

Could new processors from AMD and Intel spur a slight rebound?

• By Herb Torrens
• September 21, 2009

Worldwide server revenues decreased more than 30 percent in the second quarter of 2009 compared with last year's second quarter, according to a September report by research firm IDC. The advisory group stated that both x86 and non-x86 servers took a hit as customers shopping for all types of servers continue to defer refresh activities. 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," says Jed Scaramella, senior analyst at IDC's Data Center and Enterprise Server Group. "The economy has been brutal for some customers, and with IT budgets flat or slashed, they're putting off any unnecessary buying."

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

The x86 server-unit segment, considered to be the bellwether for the server market, outperformed other non-x86 servers, including reduced instruction-set computer (RISC), EPIC and complex instruction set computer (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 explains.

He adds: "They're the first to decline when the market goes down, and they're the first to come back when the market comes back, so I think we're seeing signs of a recovery."

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

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

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.