Server sales dropping faster than in dot-com crash: Gartner

Intel and AMD are spicing up the server market with ever-faster processors, but server vendors have suffered the largest revenue decline seen this decade, Gartner has found.

Worldwide, server revenue declined 24% in the first quarter of 2009 compared with the previous year's first quarter, and server shipments dropped an almost identical 24.2%. These were the largest year-over-year declines the server industry has experienced in recent memory, Gartner says.

"It was the biggest drop [we've seen]," Gartner analyst Martin Reynolds says. "The astonishing thing is it's a bigger drop than we saw after the dot-com crash."

Analyst firm IDC came to a similar conclusion last week when it said worldwide quarterly server revenue dropped 24.5%   year-over-year to $9.9 billion -- the lowest revenue total seen since IDC began tracking the quarterly server market 12 years ago.

Virtualization technologies that let servers run multiple applications at once have lessened the need to purchase new machines. But economic turmoil is clearly the biggest factor in customers delaying or canceling server purchases.

"If your business isn't growing, you don't need to buy any new servers at all," Reynolds says.

According to Gartner's numbers, first quarter revenue was $10.2 billion, down from $13.4 billion in the first quarter of 2008. Total shipments dropped from 2.3 million to 1.7 million. Gartner analyst Jeffrey Hewitt said the global server market is unlikely to see growth until 2010.

In the United States, shipments dropped about 27% in the first quarter, while revenue declined 21.2%. The biggest declines geographically occurred in Eastern Europe, where shipments fell 41.3% and revenue fell 47.7%.

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