Server Sales Fell 14 Percent Last Quarter: IDC

IBM retains market lead and high-end server sales fare better, but all segments face sales decline for first time in six years.


Research form IDC reported this week that worldwide server sales dropped 14 percent during the last quarter of 2008 to $13.5 billion, an indication the economic slowdown has spread into the server market. However, the research firm also found that the high end of the market held up better that the more price-competitive low end.

IDC said global server unit shipments declined 12 percent compared to the same quarter in 2007, indicating server prices dropped slightly.

Volume systems on the low end declined the most during the quarter, down 16.8 percent in revenue over the prior year. Midrange systems fell 14.5 percent, while the high-end enterprise segment saw a revenue decline of just 7.5 percent.

Unix servers, typically the most expensive hardware next to mainframes, held up the best, with only a 6.2 percent decline in quarterly revenue compared with the fourth quarter. Linux server sales were down 7 percent, while Windows server sales fell 17.8 percent. Unix server revenues account for 36.2 percent of quarterly server spending, compared with 35.3 for Windows and 13.6 percent for Linux.

Enterprise Stronger than SMB

The IDC figures showed that enterprises, the typical customer for Unix servers, have more money to spend than the SMB market, so there was less decline in the high end, according to Dan Harrington, research analyst with IDC's Enterprise Platforms Group.

"There was probably a lot of planning involved in [the high-end] market than there is in the low end market, so the money was likely already allocated for the purchase," he said. "It's a lot easier to freeze the purchases on smaller volume servers, but if a customer had spent six months getting ready to buy an IBM z Server, they aren't going to cancel that."

The across-the-board decline is the first time since 2002 that all three server segments experienced a year-over-year revenue decline in the same quarter. Back then the dot-bomb implosion led to one start-up after another going up in flames, while bigger, more established Internet firms went into survival mode and cut back IT purchases.

Harrington noted the industry learned its lesson from that mess and made sure not to get caught holding a lot of unsold inventory again.

"These companies learned from that. They are really cutting back on inventory," said Harrington. "They are cutting their inventory base and that's definitely going to affect their upcoming quarters. They know demand is going down and don't want to be stuck with those inventories.”

IBM Retains Lead

The top five vendors remain unchanged. IBM held onto its number one spot, with $4.9 billion in factory revenue, a decline of 15.0 percent year over year, for 36.3 percent market share. Sales of System x, its x86-based servers, fell off while System p, its POWER-based Unix systems, actually grew.

HP was at number two spot with $3.9 billion, a 10.1 percent decline, giving it a 29.0 share for the quarter. Dell was in third place with $1.4 billion in sales, a 9.9 percent drop and 10.6 percent of factory revenue. Sun was in fourth place with $1.3 billion, off 14.3 percent and Fujitsu/Fujitsu-Siemens had $567 million for a 14.9 percent decline.

The one bright spot in the report was blade hardware. It was the only segment of the market showing growth, with factory revenue up 16.1 percent year over year and unit growth up 12.1 percent.

(This article was adapted from InternetNews.com.)

TAGS: Linux,IBM,Dell,HP,servers

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