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Worldwide Server Market Revenues Increase 11.0% in Second Quarter as Market Recovery Accelerates, According to IDC

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Press release

FRAMINGHAM, Mass., August 24, 2010 - According to the International Data Corporation (IDC) Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market increased 11.0% year over year to $10.9 billion in the second quarter of 2010 (2Q10). This is the second consecutive quarter of year-over-year revenue growth and the fastest quarterly revenue growth since 2003, as market demand continued to improve around the world. Server unit shipments increased 23.8% year over year in 2Q10, improving slightly over the strong 23.0% year-over-year shipment growth reported in 1Q10 and representing the fastest year-over-year quarterly server shipment growth in more than five years.

Volume systems experienced the sharpest improvement with year-over-year revenue increasing 31.7%, the third consecutive quarter of positive growth for the segment. Midrange server demand improved significantly with year-over-year growth of 15.6%, the segment's first positive growth in nine quarters and another sign of improving server market conditions. Demand for high-end enterprise systems continued to be soft, as revenue declined 27.2% when compared to 2Q10. This is the seventh consecutive quarter of contraction in the high-end enterprise server segment of the server market, most of which occurred during the economic downturn.

"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. "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."

Overall Server Market Standings, by Vendor

HP assumed the number 1 position in the worldwide server market with 32.5% factory revenue share for 2Q10; HP increased revenue 26.0% year over year and gained 3.9 points of share from a year ago. HP's growth was led by strong demand for its x86 ProLiant servers during the quarter. IBM held the number 2 spot with 29.8% share for the quarter as factory revenue decreased 3.2% compared to 2Q09. Although IBM experienced weakness in its Power Systems and System z servers as customers waited for the completion of a product refresh cycle for both product sets, demand for x86-based System x servers remained strong in the quarter. Dell maintained third place with 15.3% factory revenue market share in 2Q10. Dell gained 2.9 points of share year-to-year on strong 36.5% revenue growth driven by demand from enterprise customers. Oracle maintained the number 4 position in the worldwide server market, with 5.9% a year-over-year revenue decline in 2Q10 to 8.6% market share. Fujitsu, which rounded out the top 5 vendors, experienced a 7.9% increase in factory revenue, holding 3.4% revenue share in 2Q10.

Top Server Market Findings

  • Microsoft Windows server demand was positively impacted by the accelerating x86 server market, as hardware revenue increased 6.7% and unit shipments increased 28.2% year over year. Quarterly revenue of $5.0 billion for Windows servers represented 46.5% of overall quarterly factory revenue.
  • Linux server demand also improved in 2Q10, with revenue growing 30.1% to $1.8 billion when compared with the second quarter of 2009. Linux servers now represent 16.8% of all server revenue, up 2.5 points over 2Q09.
  • Unix servers experienced 7.3% revenue decline when compared to 2Q09, as customers waited for details about the IBM Power Systems servers, based on the new POWER7 processor, which was launched in August, and as they awaited additional detail about the Oracle server roadmap for SPARC-based systems. In addition, HP's Integrity server line, which is based on Intel Itanium processors, was announced in June, at the close of the second quarter. Worldwide Unix server revenues were $2.9 billion for the quarter, representing 26.3% of quarterly server spending (down 52 points over 2Q09, but up 3.9 points from 1Q10).
  • The market for non-x86 servers, including servers based on RISC, EPIC, and CISC processors, declined 16.0% year over year to $3.9 billion in 2Q10. 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.

"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," said Jean S. Bozman, research vice president, Enterprise Servers at IDC. "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 (servers priced from $25,000 to $250,000)."

x86 Industry Standard Server Market Dynamics

x86 server revenues continued to accelerate in 2Q10, growing 35.3% in the quarter to $7.0 billion worldwide as unit shipments increased 25.8% to 1.8 million servers. IDC notes that each of the top 5 server vendors experienced positive x86 server revenue growth in the quarter. HP experienced strong revenue growth and led the market with 39.2% revenue share. Dell retained second place, securing 23.9% revenue share while IBM now holds 16.7% revenue share. Overall, this was the fastest year-over-year factory revenue growth for x86 servers in more than 10 years.

"Within the x86 server market, enterprise spending has had a strong return through server refreshes," said Reuben Miller, senior analyst, Enterprise Servers at IDC. "As the economy begins to show signs of recovery, large enterprise businesses are gaining a better view of spending capabilities for the remainder of the fiscal year and beginning to increase their investments"

Bladed Server Market Results

The blade market accelerated in the quarter with factory revenue increasing 40.3% year over year, with shipment growth increasing by 13.6% compared to 2Q09. Overall, bladed servers, including x86, EPIC (Itanium-based), and RISC blades, accounted for $1.6 billion in revenues, representing 15.0% of quarterly server market revenue. More than 80% of all blade revenue is driven by x86 systems, a segment in which blades now represent 18.9% of all x86 server revenue. HP maintained the number 1 spot in the server blade market in 2Q10, with 58.8% revenue share, and IBM finished with 22.6% revenue share.

"Blade adoption continued to gain momentum in the second quarter of 2010, as blades posted the largest revenue growth of any market segment," said Jed Scaramella, research manager, Enterprise Servers at IDC. "Vendors continue to build out their blade offerings through enhanced virtualization, management, and I/O capabilities; customers are leveraging these technologies as part of converged systems that are building block to future internal cloud infrastructures."

Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, Second Quarter of 2010 (Revenues are in Millions)

Vendor

2Q10

Revenue

2Q10 Market

Share

2Q09

Revenue

2Q09

Market

Share

2Q10/2Q09

Revenue

Growth

1. HP

$3,528

32.5%

$2,800

28.6%

26.0%

 

2. IBM

$3,238

29.8%

$3,347

34.2%

-3.2%

 

3. Dell

$1,663

15.3%

$1,218

12.4%

36.5%

 

4. Oracle

$938

8.6%

$997

10.2%

-6.0%

 

5. Fujitsu

$368

3.4%

$341

3.5%

7.9%

 

Others

$1,132

10.4%

$1,086

11.1%

54.3%

 

All Vendors

$10,868

100.0%

$9,789

100.0%

11.0%

 

IDC's Worldwide Quarterly Server Tracker, August 2010