Server Sales Fall But Shipments Climb

Servers are still selling at a healthy clip, but customers are consolidating
gear to cut costs, according to new research from IDC and Gartner.

IDC said worldwide server sales dipped 1.9 percent to 11.9 billion in the
first quarter of 2006 after several quarters of growth.

The research firm said 2 million units shipped during the period, up from
1.7 million units in Q1 2005.

Research rival Gartner, which uses different metrics to tally how servers
sell, said server revenue for Q1 2006 was flat,
notching $12.35 billion compared with $12.34 billion in Q1 2005.

However, Gartner said Q1 server shipments increased 13.7 percent from Q1

IDC analyst Matt Eastwood said the server market’s deceleration portends
shifts in IT spending patterns, with IT managers condensing their gear to
meet business needs, while factoring in budgeting and staffing

HP and IBM tied for the top position with 28.1 percent and 27.9 percent of
server revenues, respectively. Dell kept the third place with 11.1 percent
for the quarter.

Sun Microsystems saw a 5.8 percent year-over-year revenue growth in the
period and increased its market share to 10.8 percent from 10 percent in Q1

IDC analyst Steve Josselyn said Sun’s UltraSparc T1-based multi-core machines
and Opteron-based x64 Galaxy servers
are “beginning to resonate with customers.”

Volume servers, at less than $25,000, continue to be the top seller, with
sales growing 6.3 percent year over year.

Mid-range server sales continue to get squeezed by the low-end and the
high-end, dropping 16.2 percent. The high-end also lost out to the low-end,
dipping 3.2 percent year over year.

Most volume servers run Microsoft Windows, so it comes as no surprise that
IDC found that Windows-based machines continued to show strong growth, with
revenues growing 5.9 percent on quarterly factory revenue of $4.4 billion
and a 12.9 percent increase in unit shipments year over year.

This makes Windows the largest single segment of the server market,
comprising 37.1 percent of all server revenue in 1Q06.

Windows is the likely cause behind the Unix servers experienced a 7.1
percent decline in sales year over year, while unit shipments declined 8.7
percent from Q1 2005.

Unix revenues totaled more than $3.9 billion for the quarter and accounted
for 33.2 percent of sales.

Linux servers continued to grow at 17 percent and now carries 12.2 percent
of all server revenue.

In terms of chip architecture, the x86 server market tallied $6.1 billion
worldwide, thanks to an uptick in AMD-based Opteron systems, which accounted
for over $1 billion of server revenue in the quarter.

Itanium-based systems, once maligned by almost every server vendor not named
HP, grew 41.8 percent year over year.

Blade servers continued their upward climb, with sales rocketing 43.4
percent and shipments ascending 29.5 percent year over year.

No surprise: IBM held the No. 1 spot here, with 40.1 percent market share.
HP held 35.6 percent share, and Dell retained the third position with 11.1
percent, but is growing nearly twice the rate for blades.

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