HPC Server Market Declined 11.6% in 2009, Return to Growth Expected in 2010, According to IDC

FRAMINGHAM, MA. – March 24, 2010 – Factory revenue for the high performance computing (HPC) technical server market declined by 11.6% in 2009 to $8.6 billion, down from $9.7 billion in 2008, according to the International Data Corporation (IDC) Worldwide High-Performance Technical Server QView. Unit shipments dropped 40% year over year during the recession year. IBM and HP ended the year in a statistical tie* with 29.3% and 28.6% of overall factory revenue market share respectively.

A bright spot was the "Supercomputers" segment for HPC systems priced at $500,000 and up, which grew by 25% to reach $3.4 billion during the difficult year. Fueled by multiple transactions in the $100 million range, the top bracket in this segment, for HPC systems priced above $3 million, grew even faster, expanding by a whopping 65% to reach $1.0 billion. At the other end of the price spectrum, revenue from "Workgroup" HPC systems priced below $100,000 slid 33% to $1.7 billion as buyers delayed or canceled some planned acquisitions in this segment that is characterized by purchases based on shorter sales cycles and more discretionary spending.

"IDC expects the HPC technical server market to begin recovering from the impact of the global economic recession in early-2010, with year-over-year growth projected at 5% to 7%. And just as the recession affected HPC market segments unequally, so too will the recovery," said Earl Joseph, program vice president for HPC. "Many firms have been so battered that they will maintain capex restrictions even in mission-critical areas such as HPC."

"On the other hand, HPC is such an entrenched part of the R&D process in leading oil and gas companies, in government, and in some entertainment and consumer product firms, that budget cuts during the recession have been rare and HPC growth plans are already in place," said Jie Wu, research director for Technical Computing. "Government and university spending, which together make up about 65% of all HPC server revenue, declined less than the overall market in 2009 and with some help from the U.S. Government stimulus funding should remain another bright spot during the recovery."

Vendor Highlights

* IBM took the lead in the Supercomputer segment with 45% market share and, compared to the prior year, IBM's revenue in this segment was up 37%. The growth was fueled by both IBM's traditional focus on the high-end of the market and the resilience of this particular segment to the overall economic conditions.

* HP maintained its leadership position in the sub-$500K market with 33% revenue share, although its revenue in this segment was down 32% year over year. The drop in sales in this part of the market was mainly caused by cuts in customers' discretionary spending during the recession.

* Dell held on to its number three position overall with nearly 13% market share. Year-over-year revenues were down by slightly more than 29%. As a cluster vendor with its primary focus on the mid-to-low end of the market, Dell was hurt by the major budget contractions in these segments.

* Sun captured 4.1% revenue share and was ranked in the number four position, finishing the year in a statistical tie* with Cray. Sun's overall revenues were down 25% year over year. Both the Oracle-Sun merger and the down economy had a negative impact to the company's sales in 2009.

* Cray, the supercomputer company, took 4.0% market share overall and finished the year in the number four position, tied* with Sun. The company had a nice recovery from 2008 with year-over-year growth of 57%, thanks to its strong focus on the very high end of the market, which remains somewhat insulated from economic conditions.

Worldwide Technical Computing Hardware Server, 2009 Top 5 Vendor Revenue and Market Share

(revenues in millions)

Vendor 2009 Revenues 2009 MarketShare 2008 Revenues 2008 MarketShare 2009/2008 Growth

1. IBM $2,532 29.3% 2,590 26.5% -2.3%

1. HP $2,473 28.6% 3,563 36.5% -30.6%

3. Dell $1,100 12.7% 1,554 15.9% -29.2%

4. Sun* $350 4.1% 467 4.8% -25.1%

4. Cray* $342 4.0% 218 2.2* 56.7%

Others $1,840 21.3% 1,379 14.1% 33.4%

Total $8,637 100% 9,771 100% -11.6%

Source: IDC Worldwide Technical Computing QView, February 2010.

* Note: IDC declares a statistical tie in the worldwide server market when there is less than one percent difference in the factory revenues of two or more vendors.

The IDC Worldwide High-Performance Technical Server QView presents the HPC market from various perspectives, including by competitive segment, vendor, cluster versus noncluster, geography, and operating system. It also contains detailed revenue and shipment information by HPC model.

For more information about the IDC Worldwide High Performance Technical Server QView, please contact Jie Wu at jwu@idc.com.

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. For more than 46 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com [http://www.idc.com].