Although this is the fifth consecutive quarter of year-over-year revenue decline, the market grew sequentially for the first time since 4Q08. Server unit shipments declined 17.9 percent year over year in 3Q09, a significant improvement over the 30.1 percent year-over-year decline experienced in 2Q09, but grew a healthy 12.4 percent quarter over quarter -– the largest sequential unit growth since 2005.
All three server segments -– volume, midrange enterprise, and high-end enterprise –- experienced year-over-year revenue decline in 3Q09, marking the fourth consecutive quarter in which this has happened.
However, the market for volume servers improved sequentially in the quarter as demand is returning to the low end of the market. Volume systems revenue declined 14.7 percent year over year in the third quarter, the smallest decline for this important market segment since 3Q08. Revenue for midrange enterprise servers declined 23.4 percent year over year, while revenue for high-end enterprise servers declined 19.3 percent year over year.
"The worldwide server market exceeded expectations in the third quarter with improving x86 server demand leading the way, which was driven in part by the infrastructure refresh momentum that is building in many geographies. In fact, x86 server revenues experienced their largest sequential quarterly revenue increase in nearly five years," said Matt Eastwood, group vice president of Enterprise Platforms at IDC.
"IDC believes that platform migration is once again gaining steam in the market and the post-recession server deployment patterns will establish the technology agenda in the datacenter for the next business cycle. For server vendors, after five quarters of market contraction, the next few quarters will be critical to determining the technology platform winners and losers in the years ahead."
Overall server market standings, by vendor
IBM and HP ended the third quarter in a statistical tie* with 31.8 percent and 30.9 percent of overall factory revenue market share, respectively. IBM's overall factory revenues declined 12.9 percent year over year helped in part by healthy System x and System p sales.
HP experienced a 16.8 percent year-over-year factory revenue decline in 3Q09. Dell experienced a 6.8 percent revenue decline and maintained third place with 13.5 percent overall market share in 3Q09, helped in part by strong server sales growth from its Datacenter Solutions business unit.
Sun maintained its fourth place position by posting a 35 percent year-over-year revenue decline and holding 7.5 percent market share for the quarter as many customers wait for additional product roadmap detail following Oracle's pending acquisition of Sun. Fujitsu maintained its fifth-place standing in terms of factory revenue, with 5.7 percent market share in the quarter, an improvement over its 3Q08 market position.
Top-level server market findings
* Microsoft Windows server revenue was $4.5 billion in 3Q09 showing a 12.8 percent year-over-year decline and comprising 43.0% of all server revenue in the quarter. Windows servers account for the single largest segment, by operating system, in the worldwide server market.
* Linux server revenue declined 12.6 percent year over year to $1.5 billion in the quarter. Linux servers now represent 14.8 percent of all server revenue, up slightly from 14 percent a year ago.
* Unix servers experienced a 23.4 percent revenue decline when compared with 3Q08. Worldwide Unix revenues were $2.8 billion for the quarter, representing 26.9 percent of quarterly server spending. IBM gained 5.1 points of share year over year and holds the 3Q09 leadership position, posting 39.5 percent share in this segment, followed by Hewlett Packard (29.2 percent) and Sun Microsystems (23.4 percent), respectively, based on factory revenue.
x86 industry standard server market dynamics
x86 server factory revenue declined 12.3 percent year over year in 3Q09 to $6.1 billion. However, x86 factory revenues increased a healthy 18.7 percent when compared with 2Q09. This is the largest sequential improvement in x86 server revenue in nearly five years (since 4Q05).
On a year-over-year comparative basis, shipments also continued to slip when compared to 2008 market highs, dropping 17 percent to 1.6 million units. HP led the market with 37.7 percent factory revenue share as Dell held second place with 23.2 percent factory revenue share, and IBM maintained the third position with 18.5 percent factory revenue share.
Overall, IBM exhibited the strongest x86 performance of the top 3 OEMs, gaining 2.5 points of market share on a 1.2 percent improvement in year-over-year factory revenue.
"The x86 marketplace began showing expected signs of recovery in the third quarter of 2009. Customers found a convincing value proposition to refresh their systems due to strong product releases from vendors powered by the latest Intel and AMD processors. IDC expects much of the weakness found in the first half of 2009 to be a direct result of not only constrained IT budgets, but also pent-up demand for these devices," said Daniel Harrington, research analyst, Enterprise Server Group.
"With many of the latest x86 offerings promising a return on investment of less than a year, IT managers were able to free up budget to invest in much needed replacement of their aging infrastructure. Because of constrained budgets, customers also got smarter and began investing in more fully configured systems to support their virtualized environments. As the market continues a volume-based rebound, the x86 market will continue to develop and should expect to return to positive growth shortly."
Blade server market shows strong shipment and revenue growth
After two consecutive quarters of declining year-over-year revenues, the Blade server market segment returned to quarterly revenue growth with factory revenue increasing 1.2 percent year over year on a 14 percent year-over-year shipment decline.
Overall, bladed servers, including x86, EPIC, and RISC blades, accounted for $1.4 billion in the third quarter, representing 13.6 percent of quarterly server revenue. IBM exhibited the strongest blade server performance of the top five OEMs, gaining six points of market share on 27.2 percent year-over-year factory revenue growth.
HP led the market with 50.7 percent revenue share as IBM held second place with 29.4 percent revenue share, and Dell maintained the third position with 8.9 percent revenue share.
"Customers are leveraging blade technologies to optimize their environments in response to the pressure of the economic downturn and tighter budgets. Blade technologies provide IT organizations the capability to simplify their IT while improving asset utilization, IT flexibility, and energy efficiency,” said Jed Scaramella, senior research analyst in IDC's Datacenter and Enterprise Server group.
"For the second consecutive quarter, the blade segment increased in revenue on a quarter-to-quarter basis, while simultaneously increasing their average sales value (ASV). This was driven by next generation processors (Intel Nehalem) and a greater amount of memory, which customers are utilizing for more virtualization deployments. IDC sees virtualization and blades are closely associated technologies that drive dynamic IT for the future datacenter."
Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, Q3 of 2009
(Revenues are in Millions)
Source: IDC's Worldwide Quarterly Server Tracker, December 2009
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