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Server Sales Strong in All Sectors

By Andy Patrizio (Send Email)
Posted Aug 23, 2007


IDC released its Worldwide Quarterly Server Tracker for the second quarter 2007, and despite the talk of a sales slowdown, the top server vendors are all doing well. Yes, even Sun and Dell were up. IDC reports all the major server vendors had a good quarter, cites improved refresh cycle and familiarity with virtualization technology as catalysts.

Revenue in the second quarter for the worldwide server market grew 6.3 percent over 2006 figures to $13.1 billion, the fifth consecutive quarter of positive revenue growth and the highest Q2 server revenue since the market peaked in 2000, according to IDC.

Server unit sales also rose nicely, up 6.1 percent over 2006 figures, driven by an improved refresh cycle and increasing familiarity with virtualization technology.

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"People are more comfortable with the technologies that are out there and customers are deploying them," Jed Scaramella, research analyst in IDC's Enterprise Computing group, told internetnews.com. "The message is getting out. People want to consolidate and centralize for consolidation and costs. It's easier to maintain and easier to control costs that way."

IDC and Gartner, the other main market research firm, tend to release their quarterly figures around the same time and the figures are usually are very close. This quarter is no exception, with Gartner's Q2 report released on Monday largely on par with IDC's findings in terms of revenue and growth.

Volume systems, another name for low-cost servers, was the primary driver for growth in Q2 with an 11 percent year over year growth rate. Revenue for midrange enterprise servers increased 0.2 percent over 2006 while high-end servers grew 1.7 percent. Once again, x86-based servers did all the heavy lifting, with 15.5 percent revenue growth over 2006 while RISC and other non-x86 servers dropped 2.3 percent.

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IBM  remained the number one vendor, with 31.0 percent market share in factory revenue and year over year growth of 6.4 percent. HP was its usual close second at 28.2 percent revenue share and 8.0 percent growth.

In at number three was Sun with 13.0 percent of the revenue and 5.6 percent revenue growth. Scaramella said Sun is holding well with its existing customers.

"They've come back solid, with all their product launches. They've found their place in the market, they will focus on higher end customers so they won't be a volume player. Sun has solidified the installed base, now the question is can they grow outside that," said Scaramella.

In at fourth place was Dell , which is also experiencing its own turnaround story. It had the strongest growth of the four, with factory revenue rising 20.2 percent year over year.

"The thing to keep in mind is they had a not so good 2006," said Scaramella. He also credits Michael Dell with changing his company's strategy. "They've expanded services offering and focused more on long-term value rather than just trying to leverage direct model."

In terms of sales by operating system, there were no real surprises. Linux servers posted the fifth consecutive quarter of accelerating revenue growth, with year-over-year revenue growth of 19.0 percent. Linux servers now represent 13.6 percent of all server revenue.

Windows server sales show no signs of slowing down (IDC said server revenue rose 18.7 percent over 2006) despite the impending release of Windows Server 2008, the first update in five years. Servers running Windows accounted for 38.2 percent of all server revenue in the quarter. Unix servers were up slightly by 4.0 percent and represented 31.7 percent of quarterly server spending.

Finally, IBM's System z mainframes also had a good quarter with 4.0 percent revenue growth over last year. System z sales account for 9.5 percent of all server revenue in Q2.

Scaramella said he expects sales to dip slightly in Q3 and then pick up again in Q4 of this year.

Article appeared originally on Internetnews.com.

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