Servers serving up some market share

According to IDC’s Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market grew at 8.1 per cent year over year to $12.5 billion in the third quarter of 2005, marking the tenth consecutive quarter of positive overall revenue growth. This demonstrates continuing end-user investment in a robust server infrastructure as a fundamental component of other IT investments in software, storage and services.

Volume server revenue grew 14.8 per cent year over year and continues to represent the primary growth engine for the server market overall. Revenue for midrange enterprise servers grew 3.8 per cent year over year, marking the fourth consecutive quarterly increase in that segment. However, the high-end enterprise server market showed a 1.2 per cent decline year over year, making it the fourth consecutive quarter of declining revenue for high-end enterprise servers.

“Although there was continued IT investment across all three server classes, the volume and midrange enterprise server segments are showing the strongest growth, speaking to IT purchasers’ continuing focus on cost containment, which is often achieved through strategic server consolidation and server virtualization initiatives,” said Matt Eastwood, program vice-president of worldwide server research at IDC. “Both scale-out and scale-up models for adding computer capacity are in place at most customer sites, giving IT managers flexibility in the way they install, deploy and maintain server-hardware resources.”

Top-Level Server Market Findings o Year-over-year unit shipment growth of 11.3 per cent – two-thirds the year-over-year unit growth rate observed in 3Q04 – reflects a transition in the volume-server market segment as a growing number of users implement virtual servers requiring increasingly robust server resources, which effectively drives higher average selling values and lower unit growth. o Linux servers posted their thirteenth consecutive quarter of double-digit growth, with year-over-year revenue growth of 34.3 per cent and unit shipments up 20.5 per cent. Although, both factory revenue growth and unit growth have cooled from 2Q05 levels, it is clear that customers continue to expand the role of Linux servers into a broader range of workloads in both the commercial and technical segments of the market. o Microsoft Windows servers continued to show strong growth, as revenues grew 17.7 per cent and unit shipments grew 15.3 per cent year over year. Significantly, quarterly factory revenue of $4.6 billion for Windows servers represented the largest single segment of the server market for the first time –increasing revenue share by 3.0 per cent over 3Q04 — as customers deploy more fully configured Windows servers in support of scalable workloads and consolidation projects. o Unix servers experienced a 0.4 per cent decline in factory revenue year over year, while unit shipments declined 13.7 per cent when compared with 3Q04. Worldwide Unix revenues of more than $3.9 billion for the quarter represented 31.7 per cent of overall quarterly factory revenue. This contrasts with 2Q05 –historically a strong quarter for Unix spending — which saw a strong seasonal surge of IT investment in midrange enterprise Unix servers and high-end enterprise Unix servers.

Overall Server Market Standings, by Vendor o IBM maintains the No. 1 spot in the worldwide server systems market with 32.3 per cent market share in factory revenue, growing its revenue by 10.3 per cent when compared to the same quarter one year ago. HP continued to hold the number two spot in terms of factory revenue with 27.8 per cent share, growing revenue 12.4 per cent compared to 3Q04. o In terms of unit shipments, HP maintained the number one position worldwide with 28.8 per cent server shipment share, growing shipments 6.4 per cent year over year. Dell maintained the No. 2 spot in terms of worldwide server shipments with 23.9 per cent share, up from 22.2 per cent share in 3Q04. o After several quarters of a statistical tie for third place in factory revenue, Dell assumed third place on its own with 10.5 per cent market share in 3Q05. Dell experienced 11.8% revenue growth compared with 3Q04, while Sun experienced an 7.6 per cent year-over-year revenue decline in 3Q05 to 8.7 per cent market share. o Fujitsu/Fujitsu-Siemens maintained a fifth place standing in terms of factory revenue, with 6.1 per cent market share. The Fujitsu Group of companies saw 5.9 per cent factory revenue growth year over year.

Standard servers

End-user demand for x86 servers, including both x86-32 and x86-64 processors, continued to be strong, with 16.0 per cent year-over-year revenue growth reaching nearly $6.3 billion in factory revenues worldwide. However, growth for the x86-64 segment alone was more than sevenfold, while x86-32 server revenue declined 60.7 per cent as the ecosystem shifted toward 64-bit enablement. In fact, x86-64 servers represented 69% of all x86 server spending and now comprise the single largest segment of the server market by CPU type for the first time as this rapid transformation of the x86 marketplace into a segment that is 64-bit enabled continues.

“The throughput of x86 servers continues to increase as the transition to 64-bit capability accelerates and these capabilities will only increase further with a wholesale move toward dual-core processors in the x86 server market over the next few quarters,” said John Humphreys, research manager for enterprise servers.

“Dual-core servers represent nearly 25 per cent of all server spending today and in the x86 market, blade form factors are leading the move to dual core. In 3Q05, dual core represented nearly 10 per cent of blade factory revenue, illustrating the growing importance that customers are placing on heat and power concerns. We expect the transition to dual core in the x86 market will accelerate over the next 4 or 5 quarters as customers look to take advantage of the additional capability the technology provides.”

Burning up blades

The server blade market showed continued growth in the quarter, with shipments increasing by 72.1 per cent year over year and factory revenue gaining 96.8 per cent year over year. Overall, bladed servers, including both x86, EPIC and RISC blades, accounted for $569 million in the third quarter, representing 4.6 per cent of quarterly server market revenue. IBM maintained the No. 1 spot in terms of server blade revenues, with 42.0 per cent market share, while HP maintained the No. 2 position with 31.6 per cent share. Dell holds the No. 3 position with 9.0 per cent share of factory blade revenues.

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