Worldwide Server Revenues Up Slightly, But Shipment Growth Slows

If economic worries stay with buyers, then spending on new systems could continue to slow, analysts with IDC lament.
Revenue in the worldwide server market inched up slightly in the third quarter, as the number of shipments grew at the slowest rate in six quarters, a research firm said.

Factory revenue rose by 0.5% from the same period a year ago to $13.1 billion, IDC said Thursday. Shipments increased by 6.3% from a year ago, the lowest growth rate since the first quarter of 2006. Year-over-year growth a year ago was 7.8%.

IDC blamed the lackluster market on concerns about the economy, particularly in the United States. If economic worries stay with buyers, then spending on new systems could continue to slow.

A breakdown of the overall market showed that revenues from so-called volume systems, which are priced at less than $25,000, rose by 8.1% year over year in the quarter, the second highest growth rate in the last eight quarters. Revenue from midrange enterprise servers, which range from $25,000 to less than $500,000, declined 2.2% year over year, marking the second quarterly decrease in the segment. Revenue for high-end servers, defined as $500,000 or more, plummeted by 14.5%, the largest drop in more than five years.

There was no change in rankings of the top five vendors, in terms of revenues. IBM remained at the top, despite its market share falling 30% from 33% a year ago, because of weakness in System z and System i sales, IDC said. After five consecutive quarters of positive growth, revenue from IBM's System z servers running z/OS fell 31.9%.

"We believe that many customers are delaying System z purchases based on the expectation of a new family of systems to be introduced soon," Steve Josselyn, research director for IDC, said in a statement. "Customers are typically very cautious about investing heavily in a product family that will see decreasing residual values as a new enhanced product is announced and shipped."

No. 2 Hewlett-Packard, on the other hand, grew revenue by 10.3% to end the quarter with 28.6% of the market, an increase of 2.5% from a year ago. Strong sales of the ProLiant and Integrity brands contributed to the revenue boost.

Third-place Dell saw its revenues grow by 13.5%, boosting its market share to 12.1% from 10.7% a year ago. Sun posted 0.9% growth to hold on to a 10.2% share, while fifth-place Fujitsu/Fujitsu Siemens boosted its share slightly to 5.4% from 5.3%.

Arranged by software, Microsoft Windows-based server revenue increased 9.7% from a year ago to $5.3 billion, comprising 40.4% of the market. Linux-based servers posted a fifth consecutive quarter of double-digit growth. Revenues rose by 10.7% to $1.8 billion, which represented 13.4% of the overall market.

Unix-powered servers experienced a healthy 4.1% boost in revenue to $4.1 billion, or 31.1% of the market.

Sales of server blades continued their meteoric rise, growing by 41.4% to surpass $1 billion for the first time in a single quarter, IDC said. HP continued to lead the market, growing revenues by 79.6% to take a 42.1% market share. IBM was second with a 32.9% share, increasing revenues by 6.5%.

"Server blades remain the fastest growing segment and for the first time accounted for over 10% of all servers shipped," IDC analyst Jed Scaramella said in a statement.

Revenues from x86 server grew a health 9.1% to $7.2 billion, which was the second highest quarterly total ever reported. HP led the market with a 33.33% share. Dell was second with a 21.8% market share.

IDC's server report followed on the heels of rival Gartner's. The latter research firm painted a more optimistic picture, saying shipments for the third quarter rose 8.7% from a year ago to 2.l2 million units and revenues climbed 2.6% to $13.4 billion. Numbers from analyst firms often differ based on differences in methodology.