Despite Challenges, Server Market Sees First-Quarter Growth

By Andy Patrizio (Send Email)
Posted May 23, 2008


Gartner on Thursday said that worldwide server sales continue to grow at a decent pace in 2008 despite U.S. economic conditions, with revenue outpacing units as the trend toward more decked out machines continued.

Even with virtualization on the rise and an economic slowdown, the need for server capacity continues its unabated growth.

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Server sales also continue to grow despite the growing popularity of virtualization, which would seem to indicate a need for fewer boxes. Gartner found the opposite. "We've had the proliferation of x86 virtualization technology, which potentially allows people to consolidate, and they can consolidate if they wish, but there is still strong growth," noted Jeffrey Hewitt, research vice president at Gartner.

"People are still interested in a growth scenario where they are installing more servers as we go along," he said. "We're seeing a lot more Web content coming online and a lot of Web-based interface on mobile devices providing access to the Web. The back-end has to grow to power all that."

Worldwide sales rose 7.6 percent to $13.6 billion, with overall unit sales up 4.3 percent to 2.3 million units. The three biggest items in the report are the fantastic growth in blades, HP passing IBM in revenue and Dell's impressive comeback.

Blades continue to be the hottest seller, as sales rose 55 percent, from $838 million in Q1 of 2007 to $1.3 billion in Q1 2008. HP and IBM continue to lead the field, with Sun in the third spot.

HP took the overall revenue share lead over IBM in 2008, with $4.010 billion in revenue compared to IBM's $3.912 billion. HP's revenue grew by 10.3 percent compared to IBM's 2.1 percent growth. HP's primary strength is in ProLiant servers, while IBM did have a good quarter in its mainframe business thanks to the new z10 mainframes, according to Hewitt.

Dell grew its marketshare by 6.6 percent in Q1 but unit sales were up 15.8 percent, easily outpacing HP and IBM. "It does show that they've come back in terms of execution," Hewitt told InternetNews.com. "They seemed to be struggling for a while. I think this bodes well for them getting back on track, and shows they are doing a better job of improving their product line."

Sun Microsystems had a minor revenue drop of 0.7 percent but unit growth of 6.6 percent. "They are trying to get more new customers for Solaris, and that's a tough job that will take some time and effort. It's not an easy job for them," said Hewitt.

Fujitsu/Fujitsu Siemens was in the usual fifth place spot, with 4.9 percent year-over-year revenue growth and a 2.6 percent loss of unit share.

This article was originally published on InternetNews.com.

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