[August 26, 2014]

Worldwide Server Market Revenues Increase 2.5% in Second Quarter as Infrastructure Refresh Cycle Continues, According to IDC

According to the International Data Corporation (IDC) Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market increased 2.5% year over year to $12.6 billion in the second quarter of 2014 (2Q14). Server unit shipments improved 1.2% year over year in 2Q14 to 2.2 million units as investments in hyperscale datacenter capacity were largely offset by consolidation, which continued to be a strategic focus for many large and small customers around the globe. Additionally, IDC (News - Alert) continues to see signs of a server refresh cycle that is expected to lift the market going forward.

On a year-over-year basis, volume systems experienced 4.9% revenue growth. This was the fifth consecutive quarter that volume system demand increased year over year. Midrange systems also experienced growth of 11.6% year over year as technology refresh cycles began to positively impact the segment. Meanwhile, high-end enterprise systems experienced a year-over-year revenue decline of -9.8% primarily due to difficult annual comparisons in the segment.

"The server market is experiencing the beginning of a cyclical refresh cycle as systems deployed shortly after the financial crisis are retired and replaced. IDC expects this refresh cycle will continue well into 2015 and be further accelerated by Microsoft's (News - Alert) announcement that it is ending support for Windows Server 2003 coupled with Intel's forthcoming release of the Grantley Xeon EP and a significant number of related server platform announcements," said Matt Eastwood, Group Vice President and General Manager, Enterprise Platforms at IDC. "At the same time, IDC is also seeing early stage enterprise investment in 3rd Platform workloads that leverage Webscale architectures typically seen in hyperscale environments. These workloads will drive additional interest in software-defined environments that will further enhance the need for servers deployed as the infrastructure underpinning these next generation datacenters."

Overall Server Market Standings, by Vendor

HP held the number 1 position in the worldwide server market with 25.4% factory revenue share for 2Q14. HP's 4.0% revenue growth included improving demand for x86-based ProLiant servers and continued weakness in Itanium-based Integrity server revenue. IBM held the number 2 spot with 23.6% share for the quarter as factory revenue decreased -10.2% compared to 2Q13. Demand for IBM's Power -based systems declined sharply year over year in advance of a significant technology refresh. Dell maintained the third position with 16.6% factory revenue market share in 2Q14 as factory revenue declined -6.5% compared to 2Q13 as Dell works to re-align its PowerEdge server business with its solutions selling strategy. Oracle and Cisco (News - Alert) ended the quarter in a two-way statistical tie* for the number 4 position with 5.9% and 5.8% factory revenue share, respectively. Cisco's 2Q14 factory revenue increased 35.4% compared to 2Q13, gaining 1.4 points of market share. Oracle's factory revenue was up 3.9% year over year in 2Q14.

Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, Second Quarter of 2014

(Revenues are in Millions)

Source: IDC Worldwide Quarterly Server Tracker, August 26, 2014.

* Note: IDC declares a statistical tie in the worldwide server market when there is less than one percent difference in the revenue share of two or more vendors.

In addition to the table above, an interactive graphic showing worldwide market share (based on factory revenue) for the top 5 server vendors for 2Q14 is available here. The chart is intended for public use in online news articles and social media. Instructions on how to embed this graphic can be found by viewing this press release on IDC.com.

Top Server Market Findings

• Demand for x86 servers improved in 2Q14 with revenues increasing 7.8% year over year in the quarter to $9.8 billion worldwide as unit shipments increased 1.5% to 2.2 million servers. HP led the market with 29.6% revenue share based on 7.4% revenue growth over 2Q13. Dell retained second place, securing 21.2% revenue share.
• Non-x86 servers experienced a revenue decline of -12.8% year over year to $2.7 billion, representing 21.8% of quarterly server revenue. This was the twelfth consecutive quarter of revenue decline in the non-x86 server segment. IBM leads the segment with 69.1% revenue share following a year-over-year revenue decrease of -13.9% when compared with the second quarter of 2013.
• Blade servers, which are highly leveraged in enterprises' virtualized and converged environments, increased 7.0% year over year to $2.1 billion. Blades now account for 17.0% of total server revenue. HP maintained the number 1 spot in the blade server market in 2Q14 with 42.2% revenue share; Cisco and IBM held the second and third positions in the blade market with 25.2% and 13.7% revenue share, respectively.
• Density-optimized servers, utilized by large homogeneous datacenters, experienced a difficult year-over-year comparison due to several large deployments that occurred in the second quarter of 2013. Revenue declined -7.6% year over year to $768 million as unit shipments decreased
  -16.1% to 216,314 servers. Density-optimized servers represent 6.1% of all server revenue and 9.7% of all server shipments.
• Regionally, Asia/Pacific (excluding Japan) and Western Europe experienced the sharpest growth with year-over-year revenue increases of 6.9% and 6.0%, respectively. China continued to exhibit significant growth with year-over-year revenue up 19.4% to $1.8 billion. The top 4 Chinese OEMs -- Inspur, Huawei (News - Alert), Lenovo, and Sugon -- all grew revenue on a year-over-year basis by more than 35%.

"Modular servers - blades and density-optimized - represent distinct segments of growth for vendors in an otherwise mature market," said Jed Scaramella, Research Director, Enterprise Servers and Datacenter at IDC. "As the building block for integrated systems, blade servers will continue to drive enterprise customers along the evolutionary path toward private clouds. On the opposite side of the spectrum, density-optimized servers are being rapidly adopted by hyperscale datacenters that favor the scalability and efficiency of the form factor."

"Demand for servers in the public cloud continues to be a major driving force for server market growth," said Kuba Stolarski, Research Manager, Enterprise Servers at IDC. "While many of the largest of these companies have already undergone periodic datacenter expansions over the past year, public cloud demand for new servers will continue to outpace the general market in the immediate future. As these customers search for new ways to maximize datacenter efficiency, their technological choices may help accelerate emerging trends in low power and alternative server architectures."

IDC's Server Taxonomy

IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers, midrange servers and high-end servers. The revenue data presented in this release is stated as vendor revenue for a server system. IDC presents data in vendor revenue to determine market share position. Vendor revenue represents those dollars recognized by multi-user system and server vendors for initial server shipments and upgrades sold through direct and indirect channels and includes the following embedded server components: frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments.

IDC's Worldwide Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and factory), segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture. For more information, please contact Hoang Nguyen at 508-935-4718 or [email protected].

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community to make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. In 2014, IDC celebrates its 50th anniversary of providing strategic insights to help clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com. Follow IDC on Twitter (News - Alert) at @IDC.

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