Server growth

The world-wide server systems market continues to gain ground, showing 2% revenue growth in the third quarter of 2003 according to US research house IDC.

This gain was nearly one percentage point higher than expected. Worldwide server factory revenue topped out at $10.8 billion. It was the second consecutive quarter of positive growth for server revenues worldwide, following nine quarters of decline during the economic downturn.

Overall, server unit shipments grew dramatically by 19.5%, reflecting the underlying demand for volume servers, which are small servers priced less than $25,000. This demand led to volume server revenue growth of 9.5% year-over-year. Sales of more expensive server systems in the midrange enterprise ($25,000 to $499,999) grew revenues by 7% year-over-year, and high-end enterprise servers (priced $500,000 or more) declined in revenue by 14% year-over-year.

‘Volume servers are generating most of the positive momentum in the worldwide server market,’ said Vernon Turner, group vice president of IDC’s Worldwide Server Group. ‘This shows that the IT community has embraced volume server deployments as a mainstream technology to meet a wide range of data-processing requirements and to support a wide variety of computing workloads. However, two quarters of positive growth do not necessarily mean that a long-lasting economic rebound is in place.’

IBM held onto its number 1 spot in the worldwide server systems market with 31.1% market share in factory revenue, gaining 1.4 points of share year-on-year. HP took the number 2 spot with 27.7% share, gaining 0.4 points of share year-on-year. The gap between Sun and Dell continued to close with number 3 Sun showing revenue share of 10.8% worldwide, while number 4 Dell showed revenue share of 9.5%. Dell has been growing its worldwide revenue market share for six consecutive quarters, IDC research shows.

x86-based servers drove much of the quarterly revenue growth year-over-year. In all, revenue derived from the sales of x86 servers (servers based on Intel and AMD microprocessors) expanded 8.3% and unit shipments grew 21.4%. The server blade market, an important new element of this segment, continued to expand its share of the market with more than 50,000 server blades purchased in the third quarter and more than 120,000 year-to-date. ‘The x86 server market continues to outpace our expectations with respect to unit shipment demand and customer spending,’ said Mark Melenovsky, program director in IDC’s server research group. ‘Strong growth for Windows and especially Linux-based solutions, modular scale-out server deployments of rack-optimized servers and blades, as well as a very good replacement cycle environment for servers purchased before the IT spending recession are all contributing to exceptional market demand.’

Linux server platforms posted a 49.8% growth in factory revenues, year-over-year, while unit shipments grew 51.4% year-over-year. ‘Linux servers have demonstrated six consecutive quarters of year-on-year revenue growth, proving that they are not a flash-in-the-pan technology and that they are meeting real-world computing requirements in HPC and commercial deployments,’ said Jean S. Bozman, research vice president in IDC’s worldwide server group.

The Windows server market continued to grow, with factory revenues increasing by 10.3% year-over-year and unit shipments gaining 21.4%. Overall, Windows servers accounted for $3.4 billion in 3Q03, representing 31.7% of quarterly server market revenue. Several factors contributed to the continued growth, including upgrades in the large Windows NT server installed base to Windows 2000 or Windows 2003. Growing average sales prices for scalable servers (with four or more processors) running Windows 2003, contributed to revenue growth, as well.

Unix server revenues were $4.1 billion in the quarter – a decline of just 3.8%, which is the lowest rate of decline in seven consecutive quarters. Driven by price competition as a sweetener, Unix server unit shipments showed an up-tick of 4.3% year-over-year. HP was the Unix server market leader in 3Q03, outpacing Sun, which had been the leader in 2Q03. Sun’s Unix revenue declined by 10.1% year-over-year, but Sun’s unit shipments grew by 17.4%, reflecting the company’s focus on low-cost computing in CY2003.

HP had 33.8% market share, in terms of factory revenue, driven by gains in Superdome shipments, while Sun had 28.4% share and IBM had 25.6% share. IDC notes that IBM gained 2 points of share in 3Q03 year-over-year, which was the largest share gain shown by the top 5 Unix server vendors.