Global server revenue down sharply in Q1: IDC

26.5% decline in shipments blamed partly on virtualisation

A precipitous fall in worldwide server shipments triggered a sharp decline in revenue for server makers during the first quarter of 2009, IDC says.

Worldwide server unit shipments declined 26.5% year-over-year in the first quarter to around 1.49 million units, the largest unit shipment decline in five years, according to IDC. Worldwide factory server revenue was down 24.5% to US$9.9 billion in the first quarter. Factory revenue refers to revenue resulting from servers shipped directly out of the factory to distributors.

Server shipments and revenue fell as customers tightened IT budgets and held back on refreshing server hardware, IDC says. Shipments of x86 servers were around 1.42 million, while shipments of other types of servers — including those with processors from the IBM Power and Sun Sparc families — were around 64,450.

One reason for the drop in server revenue was virtualisation, says Daniel Harrington, a research analyst with IDC. As an alternative to buying new servers, larger enterprises are turning to virtualisation, consolidating more workloads per physical server. Most server purchases in the first quarter were made out of necessity, especially by small and medium-sized businesses that needed more server capacity, Harrington says.

The revenue decline has trickled into the second quarter of this year as well, he says. The recession has created an uncertain environment that makes it hard to predict a turnaround in server revenue, he says. However, revenue could grow slightly year-over-year during the fourth quarter of 2009, driven partly by IT budgets opening up, according to Harrington.

Revenue fell more steeply for x86 servers than for Unix servers, IDC says. Systems with Unix OSes typically run mission-critical workloads, which makes it hard to reduce spending, Harrington says. Unix-based servers typically require very high levels of availability and are used by financial institutions such as stock markets and banks.

On the other hand, x86 servers typically run applications that are not as critical — such as email and print servers — and are also easier to spread across virtual machines.

"It's easier to freeze purchases on x86 [servers], which are a commodity at this point," Harrington says.

Revenue for x86 servers declined by 28.8% in the first quarter to reach US$5.1 billion. Revenue for non-x86 servers — including Unix systems — fell by 19.4% to reach US$4.8 billion.

IDC also saw a drop in blade system revenue, with towers gaining a larger share of the revenue mix. Blades can be expensive to set up, as they require a chassis as well as individual servers, Harrington says. Companies are not putting up the capital to buy blade systems, instead opting for the cheaper tower servers, Harrington says.

All major server vendors recorded revenue declines during the first quarter. Hewlett-Packard, the top vendor, recorded a 26.2% revenue drop to reach US$2.91 billion, a 29.3% market share. IBM came in a close second, with revenue at US$2.9 billion, a decline of 19.9%. It also had 29.3% of the market.

Dell and Sun were in a statistical tie for third place, according to IDC, with Dell at 11% and Sun at 10.3% of the market. Dell recorded the largest revenue decline of any major vendor, 31.2%, to reach US$1.09 billion. Sun, which was recently acquired by Oracle, had revenue of US$1.02 billion, a decline of 25.5%. Fujitsu was in fifth place.

Join the newsletter!

Error: Please check your email address.

Tags serversIDC

Show Comments

Market Place

[]