First-quarter server revenue dropped by 24.5 percent year-over-year, as economic turmoil bit ever deeper into companies' IT budgets, according to IDC.
Worldwide revenue in the first three months of 2009 fell to US$9.9 billion, according to figures released by the market-research firm last week. The totals mark the third consecutive quarter of year-over-year revenue decline, and the lowest quarterly server revenue since IDC began tracking the market on a quarterly basis 12 years ago, IDC said.
In the same period, server-unit shipments decreased by 26.5 percent year-over-year, compared with a 12 percent fall in the fourth quarter of 2008. The quarterly total is the lowest in five years, and represents the largest ever year-on-year drop in quarterly server unit shipments recorded by the firm.
Shipments fell in all geographic regions, as buyers of all sizes pulled back both on new strategic IT projects and on refreshing existing infrastructure, according to IDC.
However, the research firm believes demand will begin to improve in the second half of this year.
"Most enterprise organizations are deferring new IT procurements and instead focusing on extending server lifecycles and improving existing asset utilization," Matt Eastwood, IDC group vice president of enterprise platforms, said in a statement. "IDC believes that while these strategies are effective in the near term, server demand will begin to improve in the second half of the year, as customers begin to rebuild their IT capabilities in advance of a meaningful economic recovery in 2010."
Volume systems showed the sharpest decrease, with year-over-year revenue down 30.5 percent. The x86 server segment specifically dropped 28.8 percent, to US$5.1 billion on shipments of 1.4 million servers.
IDC noted that x86 servers have historically driven the growth of the overall server market, and the company expects this trend to return.
"While it may be easier for IT departments to suspend purchases of commodity boxes as opposed to more mission-critical RISC- or CISC-based servers, IDC expects x86 systems to rebound faster than the overall market in the coming quarters," analyst Dan Harrington said in a statement.
Midrange servers dropped by 13.6 percent, while the high-end enterprise segment fell by 19.5 percent.
IDC noted that this is the second consecutive quarter, and only the second time since 2002, that all three server segments experienced a year-over-year revenue decline in the same quarter.
Overall, HP and IBM tied for the top position in the market, each holding 29.3 percent of overall revenue, with IBM's sales driven by System z and System p sales. These vendors were followed by Sun and Dell in joint third place, with Dell taking an 11 percent revenue share and Sun taking 10.3 percent. Fujitsu/Fujitsu Siemens held the fifth place in revenue, with 6.7 percent.
Unix servers decreased by 17.5 percent in revenue terms, compared with the same quarter a year earlier. However, the company showed resilience in the midrange enterprise segment and increased its share of overall revenue, IDC noted. IBM led this segment.
Windows server revenue stood at US$3.7 billion, down 28.9 percent and comprising 37.3 percent of all server revenue in the quarter. Linux revenues fell 24.8 percent to US$1.4 billion, making up 13.8 percent of all revenue.
The relatively new blade server segment showed its first decline, with revenues down 14.4 percent year on year and shipments down 18.1 percent. However, the segment still increased its share of revenue in the overall server market, IDC said.
"Customers are seeking IT solutions that reduce expenses and improve efficiencies. The integrated nature of the blade platforms is adept to deliver a dynamic IT infrastructure," analyst Jed Scaramella said in a statement.
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