IDC report finds worldwide server market revenues increase

Factory revenue in the worldwide server market increased 4.6 percent year on year to $10.4 billion in the first quarter of 2010 (Q1 10) the International Data Corporation (IDC) said.

In its Worldwide Quarterly Server Tracker, the company said this was the first quarter of year-over-year revenue growth in seven quarters, as server market demand continued to improve around the world. It said server unit shipments increased 23.2 percent year over year in Q1 10, accelerating from the modest 1.4 percent increase in shipments experienced in Q4 09 and representing the fastest year-over-year quarterly server shipment growth in more than five years.

 This is the third consecutive quarter that IDC reported improving market conditions for servers worldwide. The market recovery has been led by sharply higher demand for x86 servers around the world as SMB and enterprise customers aggressively refresh their infrastructures.

Volume systems experienced the sharpest improvement with year-over-year revenue increasing 31.9 percent, the second consecutive quarter of positive growth for the segment. Midrange enterprise demand weakened with a year-over-year decline of 19.0 percent and the slowdown extended to the high-end enterprise segment as revenue declined 28.9 percent when compared to Q1 09. This is the sixth consecutive quarter that both the midrange and high-end server segments of the server market have experienced a year-over-year revenue decline.

Matt Eastwood, group vice president, Enterprise Platforms at IDC, said: “This is the third consecutive quarter that [we’ve] reported improving market conditions for servers worldwide.”

He said that the market recovery has been led by higher demand for x86 servers around the world as SMB and enterprise customers push forward in refreshing their infrastructures.

 “IDC expects the recovery to extend to Unix and mainframe platforms in the second half of 2010 as the technology refresh extends from volume- to value-oriented systems with somewhat longer planning horizons. It’s also important to note that we are in the middle of one of the sharpest periods of market inflection in a decade and we expect significant shifts in technology usage and market shares to occur as the recovery continues,” he added.

The report found that HP held the number one position in the worldwide server market with a 32.5 percent factory revenue share for Q1 10; HP increased revenue 16.3 percent year over year and gained 3.3 points of share from a year ago. IDC said HP’s growth was led by strong demand for its x86 ProLiant servers during the quarter. IBM held the number 2 spot with 27 percent.

Although IBM experienced weakness in its POWER Systems and System z servers as customers waited for the completion of a product refresh cycle, demand for x86-based System x servers remained strong in the quarter. Dell maintained third place with 16.3 percent factory revenue market share. Dell gained 5.1 points of share year-on-year. It also gained a 51.9 percent revenue growth driven by surging demand from enterprise and SMB customers. Sun and Fujitsu tied for the number 4 position. Sun, which was acquired by Oracle on Jan. 27, experienced a year-over-year revenue decline of 31.3 percent in Q1 10 to 6.6 percent market share, while Fujitsu experienced a 1.9 percent increase in factory revenue holding 6.5 percent revenue share.

And it was good news for Microsoft too with its Microsoft Windows server demand growing as a result of the accelerating x86 server market. Its hardware revenue increased 31.5 percent and unit shipments increased 22.1 percent year over year. Quarterly revenue of $4.9 billion for Windows servers represented 46.7 percent of overall quarterly factory revenue. This is the highest percentage of server hardware revenue that Windows servers have ever represented. Linux server demand also improved sharply, with revenue growing 36.5 percent to $1.9 billion when compared with the first quarter of 2009. Linux servers now represent 18.4 percent of all server revenue, up 4.3 points over Q1 09.
However, the market for non-x86 servers, including servers based on RISC, EPIC, and CISC processors, declined 25.9 percent year over year to $3.6 billion in Q1 10. This is the fourth consecutive quarter that non-x86 servers have been outperformed in the market by x86 servers. IDC however said it believed that demand for non-x86 systems will improve in the second half of the year as leading OEMs complete on important product refresh cycles, which will help drive server demand in the midrange and high-end of the market.

Jean S. Bozman, research vice president, Enterprise Servers at IDC, said: “The Unix server marketplace is in transition, with new market dynamics—and a new provider in Oracle, which just completed its acquisition of Sun Microsystems.

“This segment was hard-hit in 2009, and its product mix – with most of its revenue in the midrange and high-end segments – has yet to show signs of growth in 2010. IDC expects this decline to moderate in 2H10, as all vendors have refreshed their product set to carry forward Unix-specific, mission-critical workloads.”