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Gartner: Server Market Still Healthy Overall in Q2

Servers

IBM and Dell were the big winners in the second quarter server business, while Hewlett-Packard continued to execute well and Sun lost ground, according to Gartner's second quarter 2008 report on the worldwide server report.

Overall, the market was up 12.2 percent in terms of units, but just 5.7 percent in terms of dollars. Worldwide server revenue totaled $13.8 billion for the second quarter and unit shipments 2.3 million.

IBM (NYSE: IBM) maintained its revenue lead thanks to strong sales on the high end, with its System p Unix servers and System z mainframes. It gained a small amount of market share, mostly at HP's (NYSE: HPQ) expense, to grab 31.2 percent of the revenue in Q2 but only 13.2 percent of the unit share, putting it in third place.

This is a reflection of the fact that System p and System z servers are very high-end machines, costing in the six- to seven-digit range. So these don't sell in the quantities of a single- or dual-socket $3,000 server. In recent months, IBM has refreshed both System p and System z, which may have led to pent-up demand.

HP was the unit leader, with 30.2 percent of the market and 8.7 percent growth. It slipped slightly as Dell (NASDAQ: DELL) came on strong. Dell unit shipments soared 24.2 percent year over year, the best among server vendors, and it led server vendors in revenue growth as well, up 15.0 percent.

"Let's not forget Dell is still highly tied to the U.S., more so than HP is, which is much more diversified on a global basis in terms of markets," notes Jeffrey Hewitt, an analyst at Gartner. "They are trying to grow international markets, they are trying to come up with some channel strategies. So I think that's helping them."

Hewitt noted that Dell's best growth came not in the two-socket space, which is where the bulk of server sales are, but on the top and bottom. Dell's strength was in four-socket processors, for very high end systems and single-socket servers, for relatively small tasks.

"It could be argued that IBM had strength in the high end and Dell had strength in the low end of x86, plus a nice kick in its four-socket business," said Hewitt.

Next page: Solid quarter for HP