This is the first quarter of year-over-year revenue growth in seven quarters, as server market demand continued to improve around the world. Server unit shipments increased 23.3 percent year over year in 1Q10, accelerating from the modest 1.9 percent increase in shipments experienced in 4Q09 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 31.9%, the second consecutive quarter of positive growth for the segment. Midrange enterprise demand weakened with a year-over-year decline of 18.9 percent and the slowdown extended to the high-end enterprise segment as revenue declined 28.7 percent when compared to 1Q09. This is the sixth consecutive quarter that both the midrange and high-end server segments of the server market have experienced a year-over-year revenue decline.
"This is the third consecutive quarter that IDC reported improving market conditions for servers worldwide. The market recovery has been led by sharply higher demand for x86 servers around the world as SMB and enterprise customers aggressively refresh their infrastructures," said Matt Eastwood, group vice president, Enterprise Platforms at IDC.
"IDC expects the recovery to extend to Unix and mainframe platforms in the second half of 2010 as the technology refresh extends from volume- to value-oriented systems with somewhat longer planning horizons. It's also important to note that we are in the middle of one of the sharpest periods of market inflection in a decade and we expect significant shifts in technology usage and market shares to occur as the recovery continues."
Overall server market standings, by vendor
HP held the number 1 position in the worldwide server market with 32.5 percent factory revenue share for 1Q10; HP increased revenue 16.3 percent year over year and gained 3.3 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 27.5 percent share for the quarter as factory revenue declined 1.2 percent compared to 1Q09. Although IBM experienced weakness in its POWER Systems and System z servers as customers waited for the completion of a product refresh cycle, demand for x86-based System x servers remained strong in the quarter.
Dell maintained third place with 16.3 percent factory revenue market share in 1Q10. Dell gained 5.1 points of share year-to-year on strong 51.9 percent revenue growth driven by surging demand from enterprise and SMB customers.
Sun and Fujitsu tied for the number 4 position. Sun, which was acquired by Oracle on Jan. 27, experienced a year-over-year revenue decline of 31.9 percent in 1Q10 to 6.6 percent market share, while Fujitsu experienced a 2.2 percent increase in factory revenue holding 6.5 percent revenue share in 1Q10.
Top server market findings
* Microsoft Windows server demand was positively impacted by the accelerating x86 server market, as the hardware revenue increased 33.6 percent and unit shipments increased 28.3 percent year over year. Quarterly revenue of $5.1 billion for Windows servers represented 48.9 percent of overall quarterly factory revenue. This is the highest percentage of server hardware revenue that Windows servers have ever represented.
* Linux server demand also improved sharply in 1Q10, with revenue growing 20.4 percent to $1.7 billion when compared with the first quarter of 2009. Linux servers now represent 16.2 percent of all server revenue, up 2.1 points over 1Q09.
* Unix servers experienced 29 percent revenue decline when compared to 1Q09 as customers waited for additional detail on the Sun-Oracle server roadmap. They were also anticipating a ramp of IBM POWER7 servers, which began shipping in Q1, and, separately, HP Integrity servers based on Intel Itanium 9300 processors that were announced in April. Worldwide Unix revenues were $2.3 billion for the quarter, representing 22.2 percent of quarterly server spending (down 10.5 points over 1Q09).
* The market for non-x86 servers, including servers based on RISC, EPIC, and CISC processors, declined 25.9 percent year over year to $3.6 billion in 1Q10. This is the fourth 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 as leading OEMs complete important product refresh cycles, which will help drive server demand in the midrange and high-end of the market.
"The Unix server marketplace is in transition, with new market dynamics—and a new provider in Oracle, which just completed its acquisition of Sun Microsystems," said Jean S. Bozman, research vice president, Enterprise Servers at IDC.
"This segment was hard-hit in 2009, and its product mix – with most of its revenue in the midrange and high-end segments – has yet to show signs of growth in 2010. IDC expects this decline to moderate in 2H10, as all vendors have refreshed their product set to carry forward Unix-specific, mission-critical workloads."
x86 industry standard server market dynamics
The x86 server revenues continued to accelerate in 1Q10, growing 33.6 percent in the quarter to $6.8 billion worldwide as unit shipments increased 25.7 percent to 1.8 million servers. Each one of the top four server vendors experienced positive x86 server revenue growth in the quarter.
HP experienced sharp revenue growth and led the market with 39.2 percent revenue share. Dell retained second place, securing 24.8 percent revenue share, while IBM now holds 16.8 percent revenue share. Overall, this was the fastest year-over-year factory revenue growth for x86 servers in more than 10 years, helping HP, Dell, and IBM to all gain market share.
Bladed server market results
The blade market accelerated and continued its sharp growth in the quarter with factory revenue increasing 37.2 percent year over year, with shipment growth increasing by 20.8 percent compared to 1Q09.
Overall, bladed servers, including x86, EPIC, and RISC blades, accounted for $1.4 billion in revenues, representing 13.6 percent of quarterly server market revenue. Over 90 percent of all blade revenue is driven by x86 systems, a segment in which blades now represent 18.8 percent of all x86 server revenue.
HP maintained the number 1 spot in the server blade market in 1Q10, with 56.2 percent revenue share and IBM finished with 23.6 percent revenue share. Both HP and IBM outperformed the market and gained year-over-year factory revenue market share.
"Driven by the pent-up demand in customers' refresh cycles, the x86 rack server segment experienced its largest growth in years. The rack segment exceeded the overall market due in part to a relatively easier year-over-year compare as the economic downturn severely impacted the segment in the first quarter of 2009," said Jed Scaramella, senior analyst, Enterprise Servers at IDC.
"In the first quarter of 2009, we observed a lot of business in the mid-market as well as refresh activity of a more transactional nature; these factors have driven x86 rack-based revenue to just below 1Q08 value. Blade servers, which are more strategic in customer deployments, continue to accelerate in annual growth rates. The blade segment fared relatively well during the 2009 downturn and have increased revenue value by 13 percent from the first quarter of 2008."
Source: IDC.
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