Server revenue continued slide in Q2 on weak demand, says IDC

IBM and HP held on to the top two positions but with declining market share

By , IDG News Service |  Hardware

The server business continued to slide in the second quarter with worldwide revenue and unit sales down, IDC said Tuesday.

Revenue was down 6.2 per cent to US$11.9 billion in the second consecutive quarter of year-over-year decline, as demand for servers continued to soften in most geographic regions, the research firm said. Unit shipments were also down 1.2 percent to 2 million, after also falling in the previous two quarters.

The highest fall in revenue was in midrange systems, which dipped by about 22 percent year-over-year, while volume systems had a 2.4 percent revenue decline and revenue from high-end systems dipped 9.5 percent in the quarter ended June.

The slowing demand is a combination of factors including consolidation, virtualization, and migration initiatives by mainstream small and medium businesses and enterprise customers, and dampening demand for new IT projects in difficult economic conditions. Top server vendors tried to offset weak demand for higher-margin Unix and blade servers with lower-margin rack and density optimized servers, IDC said.

IBM held the number one position in the server market with a 27.9 percent share of revenue, but its share was down from over 29 percent last year. The company's server revenue fell in the quarter by 10 percent year-over-year because of low demand for System x and Power Systems. IBM's System z mainframe running z/OS, however, had a third consecutive quarter of growth, with revenue up by 9.9 percent year-over-year to $1.2 billion. The mainframe accounted for 9.8 percent of server revenue in the quarter.

Hewlett-Packard held the number two position with a smaller market share of close to 26 percent, after a year-on-year decline in revenue of 17.5 percent as a result of poor demand for x86-based ProLiant servers and continued decline in demand for HP Integrity servers.

Dell fared better, growing its server market share to 18.8 percent, its highest ever in any quarter, from 16 percent last year, to retain the third spot. Dell's server revenue grew 10.3 percent in the quarter. Rival Oracle held the fourth position with 6 percent market share followed by Cisco Systems at number five with 4.5 percent share after a close to 43 percent growth in revenue. Cisco had a statistical tie with Fujitsu in the last quarter.

Revenue from density optimized servers, used in large hyperscale datacenters, surged 26.6 percent year-on-year in the quarter to $735 million, while units shipped increased 13.8 percent to close to 200,000 servers. Dell continues to lead in this market with a whopping 60.5 percent share.

In contrast, revenue from blade servers was down 6.2 percent year-on-year to $2.0 billion. Blades accounted for close to 17 percent of total server revenue in the quarter. HP held the top position in this market with 44.8 percent share of revenue.

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