Worldwide Server Market Shows Resiliency with Solid First Quarter Results, According to IDC

FRAMINGHAM, MA – May 27, 2008 – According to IDC's Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market grew 3.5% year over year to $13.0 billion in the first quarter of 2008 (1Q08). Despite slowing economic growth in the U.S., this is the eighth consecutive quarter of positive revenue growth and the highest first quarter revenue in the worldwide server market since 2001. More than 2 million servers were shipped for the second consecutive quarter and unit shipment growth of 7.8% year over year in 1Q08 demonstrates that worldwide demand for servers has remained healthy in the quarter, even as virtualization technology is being adopted worldwide.

Volume systems revenue growth improved to 5.4% year over year in the first quarter, the slowest growth rate for this increasingly important segment since 4Q06. However, the segment was outperformed by year-over-year growth of 9.7% in the high-end enterprise segment. The midrange enterprise segment of the market declined 7.2% year over year, the fourth consecutive quarter of declining revenue for the segment.

"The server market continues to experience solid growth as businesses of all types focus on expanding and refreshing their IT infrastructures for both traditional and emerging cloud-based workload," said Matt Eastwood, group vice president of Enterprise Platforms at IDC. "Geographically, the Americas was the weakest region with an overall revenue decline driven in part by a slowing U.S. economy. However, it is also clear that positive exchange rates are helping drive positive server revenue growth in EMEA and Asia/Pacific. Technology suppliers will need to be careful not to become too dependent on this short-term economic boost."

Overall Server Market Standings, by Vendor

HP and IBM again finished the first quarter in a statistical tie(a) for the number 1 position in the worldwide server market with 29.0% and 28.1% share respectively. HP gained 0.2 points of share and IBM lost 0.4 points of share year over year during the quarter. HP's growth was driven by strength in its ProLiant, Integrity, and BladeSystem businesses. For IBM, revenue growth was driven by solid performance in its System z server business. Dell's grew factory revenue 9.4% year over year and moved into the number 3 position in the market holding 12.3% share for 1Q08. Sun's revenues declined 1.8% year over year in the quarter ending with 10.5% revenue share. Fujitsu/Fujitsu-Siemens maintained a fifth-place standing in terms of factory revenue, with 6.3% market share in the quarter.

Top-Level Server Market Findings

* Microsoft Windows server revenue was $5.1 billion in 1Q08 showing 4.2% year-over-year growth and gaining 0.2 points of revenue market share over 1Q07. Windows-based servers comprised 39.2% of all server revenue in 1Q08.

* Unix servers experienced a modest –0.8% revenue decline when compared with 1Q07. With particular strength in the volume and high-end enterprise segment of the Unix market, worldwide Unix revenues were $4.0 billion for the quarter, representing 30.6% of quarterly server spending.

* Linux servers posted their second consecutive quarter of solid growth, with year-over-year revenue growth of 8.4% for a total of $1.8 billion in the quarter, second only to the $2.0 billion in Linux server revenue seen in 4Q07. Linux-based servers now represent 13.7% of all server revenue.

* IBM's System z servers running the z/OS operating system returned to positive revenue growth in 1Q08, with 10.4% year-over-year growth to $1.1 billion. IBM z/OS servers accounted for 8.4% of all server revenue in 1Q08, the highest first quarter revenue for IBM's System z systems in 3 years.

* The market for non-x86 servers, including servers based on RISC, EPIC, and CISC processors, grew 2.5% year over year to $6 billion in 1Q08. IBM maintained its leadership position, posting 41.9% share in this segment, followed by Hewlett Packard (22.7%) and Sun Microsystems (19.5%) respectively based on factory revenue.

"IBM benefited from the growth in System z revenue as customers embraced the introduction of the new z10 family," said Steve Josselyn, research director for Enterprise Platforms at IDC. "After declines throughout the second half of last year, investment in the System z family returns at a time when large capital expenditures were expected to decline as a result of weak economic conditions."

x86 Industry Standard Server Market Dynamics

The x86 server market decelerated slightly in 1Q08, growing 4.4% year over year to $7.0 billion worldwide, its slowest growth rate in seven quarters. Unit shipment growth also continued with a gain of 8.5% to 1.9 million servers. Dell, Fujitsu/FSC and Sun were the only top 5 server vendors to outgrow the market in 1Q08 – growing factory revenue 9.4%, 7.9%, and 26.2% respectively – and gaining x86 market share in the process. HP led the market with 34.3% x86 revenue share with Dell holding second place with 22.7% revenue share.

“The efficiency advantages of virtualization in enterprise servers is apparent across the industry and has led to continued demand for capable x86 solutions,” said Daniel Harrington, research analyst with IDC’s Enterprise Server Group. “Geographically, the growth in the market was driven by the EMEA and Asia/Pacific regions, while the U.S. actually showed negative revenue growth in the x86 segment for the first time since the dot-com bust of the early 2000s.”

Blade Server Market Shows Strong Shipment and Revenue Growth

The server blade market showed signs of acceleration in the quarter, with factory revenue growing 53.7% year over year, the fastest growth rate in ten quarters. Overall, bladed servers, including x86, EPIC, and RISC blades, accounted for $1.2 billion in the first quarter, representing 9.2% of quarterly server market revenue. HP maintained the number 1 spot in the blade market with 46.9% market share and IBM held the number 2 position with 30.0% share.

“The blade market maintained its momentum in the first quarter as a driver of growth in the server market,” said Jed Scaramella, senior research analyst for Enterprise Platforms at IDC. “Server blade vendors have expanded their product portfolios to target new customer markets through chassis design for SMBs, and higher-end workload through non-x86 architectures. EPIC and RISC-based blades accounted for over 5% of blade revenue in 1Q08, which is double the share from the same time last year.”

Top 5 Corporate Family, Worldwide Server Systems Factory

Revenue, First Quarter of 2008

(Revenues are in Millions)

Vendor 1Q08 Revenue Market Share 1Q07Revenue Market Share 1Q08/1Q07Revenue Growth

1. Hewlett-Packard $3,770 29.0 % $3,618 28.8 % 4.2 %

2. IBM $3,651 28.1 % $3,580 28.5 % 2.0 %

3. Dell $1,594 12.3 % $1,457 11.6 % 9.4 %

4. Sun Microsystems $1,362 10.5 % $1,387 11.0 % -1.8 %

5. Fujitsu/Fujitsu Siemens $821 6.3 % $762 6.1 % 7.8 %

Others $1,798 13.8 % $1,753 14.0 % 2.6 %

All Vendors $12,998 100 % $12,557 100 % 3.5 %

Source: IDC's Worldwide Quarterly Server Tracker, May 2008

IDC's Server Taxonomy

IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers (servers priced less than $25,000), midrange enterprise servers ($25,000 to $499,999), and high-end enterprise servers ($500,000 or more). The revenue data presented in this release is stated as factory revenue for a server system. IDC presents data in factory revenue to determine market-share position. Factory revenue represents those dollars recognized by multi-user system and server vendors for ISS and upgrade units sold through direct and indirect channels and includes the following embedded server components: Frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments.

(a) 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.

IDC's Worldwide Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and factory), segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture. For more information, please contact Hoang Nguyen at 508-935-4718 or

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