Server Shipment Growth is Highest in Last Five Years, says IDC

International Data Corporation’s (IDC (News - Alert)) worldwide quarterly server tracker reports strong worldwide server sales in the second quarter as market demand continues to improve. In fact, according to IDC, with 11 percent improvement in sales, this is the second consecutive quarter of year-over-year revenue growth and the fastest quarterly revenue growth since 2003. At 11.0 percent growth, the year-over-year revenues rose to $10.9 billion in the second quarter of 2010 (2Q10). Likewise, server unit shipments increased 23.8 percent year-over-year in 2Q10, improving slightly over the strong 23.0 percent year-over-year shipment growth reported in the first quarter (1Q10).

By comparison, according to IDC, volume systems costing less than $25,000 experienced the sharpest improvement with year-over-year revenue increasing 31.7 percent for the third consecutive quarter. Similarly, with cost price between $25,000 and $250,000, the midrange server demand improved significantly with year-over-year growth of 15.6 percent, the segment's first positive growth in nine quarters. And another sign of improving server market conditions. However, the study indicates that the demand for high-end enterprise systems, which cost $250,000 or more, continued to be soft, as revenue declined 27.2 percent. The IDC report shows that this is the seventh consecutive quarter of contraction in the high-end enterprise server segment.

"The server market is at a crossroads. This is the fourth consecutive quarter of improving server market demand and the fastest quarterly server revenue growth IDC has reported in more than 5 years," said Matt Eastwood, group vice president, Enterprise Platforms at IDC, in a statement. He further added, "IDC continues to see widespread infrastructure refresh occurring across all geographies. While much of this refresh is occurring first in x86-based servers, IDC expects the recovery to extend to UNIX and mainframe platforms in the second half of 2010. That said, it is clear that a wave of migration is also occurring as customers broaden their deployment of x86-based servers to a wider range of workloads."

While Hewlett-Packard took the number one spot in the worldwide server market with 32.5 percent factory revenue share for 2Q10, IBM (News - Alert) came second with 29.8 percent share of the market. Dell maintained third place with 15.3 percent market share in 2Q10, as per IDC. Others in the descending order were Oracle (News - Alert) with 8.6 percent market share, and Fujitsu capturing 3.4 percent revenue share in the second quarter.

Also, Microsoft Windows server demand was positively impacted by the accelerating x86 server market, as hardware revenue increased 6.7 percent and unit shipments jumped  28.2 percent year-over-year. That amounted to a quarterly revenue of $5.0 billion for Windows servers, representing 46.5 percent of overall quarterly factory revenue, the report shows.

 Likewise, Linux server demand also improved in 2Q10, with revenue growing 30.1 percent to $1.8 billion in comparison to the second quarter of 2009. Hence, Linux servers now represent 16.8 percent of all server revenue, up 2.5 points over 2Q09.

On the down side, Unix servers experienced 7.3 percent revenue decline over 2Q09, and the market for non-x86 servers, including servers based on RISC, EPIC, and CISC processors, declined 16.0 percent year-over-year to $3.9 billion in 2Q10. According to IDC, this is the fifth consecutive quarter that non-x86 servers have been outperformed in the market by x86 servers. IDC believes that demand for non-x86 systems will improve in the second half of the year now that leading server vendors have completed important product refresh cycles, which will help drive server demand in the midrange and high-end of the market.

In a statement, said Jean S. Bozman, research vice president, Enterprise Servers at IDC. "The uptick in the midrange server market shows there was pent-up demand for more scalable servers, through replacement for aging servers and workload consolidation." "This segment was hard-hit in 2009, during the deepest part of the economic downturn to date, but IDC expects this decline to moderate in the second half of 2010, with shipments of new midrange enterprise server products in the Unix server market, and continued demand for more scalable x86 servers in the midrange segment,” noted Bozman.