After 10 consecutive quarters of decline, IDC anticipates 2003 will be the turning point: The first year since 2000 that spending in the U.S. server market has increased.
The research firm’s Worldwide Quarterly Server Forecast reports spending for servers is on the upswing in the United States. IDC expects the U.S. server market to recover to $18.2 billion in 2003, or about 3 percent year-to-year growth over 2002.
In other regions the picture isn’t so bright. Emerging markets in Asia/Pacific (excluding Japan) and Central and Eastern Europe are expected to fare well, achieving positive growth over 2002. However, IDC forecasts sluggish enterprise IT markets in Japan, Western Europe, and Latin America, will keep worldwide server spending flat at $49 billion.
Worldwide server data, while not nearly as glowing as the U.S.-specific data, paints a rosier picture than prior quarters. IDC pegged 2Q03 worldwide server revenue at $10.6 billion and Gartner pegged it at $10.5 billion. Quarter-to-quarter growth was marginally positive, in the case of IDC, and marginally negative, in the case of Gartner. Year-to-year growth was 1.3 percent and 0.2 percent, respectively.
Worldwide, both Gartner and IDC returned IBM to the top spot with $3.2 billion in sales, bumping Hewlett-Packard decisively into second place after several quarters of both vendors claiming top honors. Based on IDC’s accounting, this represents year-to-year growth of 10.1 percent and quarter-to-quarter growth of 20.2 percent for IBM. IDC’s data reported HP remaining virtually flat across the board with $2.9 billion in sales. Gartner reported $2.8 billion in sales for HP with year-to-year growth of 1.6 percent and quarter-to-quarter growth of 8.5 percent. With both research firms estimating Sun Microsystems’ revenue in the $1.4 billion range, its revenue declined 18.7 percent or 21.4 percent compared to 2Q02 (depending on which firm you believe), according to Gartner and IDC, respectively. Both Gartner and IDC saw a revenue increase compared to 1Q03, however.
IDC is optimistic about what this means for the future. The research firm forecasts the worldwide server market will achieve a compound annual growth rate (CAGR) of 2.8 percent during the next five years, which will make it a $56.6 billion market in 2007. Smaller form factors and more incremental infrastructure capacity will enable server units to achieve a CAGR of 12.7 percent, and 8.1 billion new server sales in 2007.
With the U.S. market leading the world on the road to recovery, it’s not surprising IBM also snagged the top spot for sales in United States and Canada according to IDC. Its $1.3 billion in revenue represents a year-to-year gain of 18.8 percent and a quarter-to-quarter gain of 59.1 percent. Big Blue was also the only vendor to increase its quarter-to-quarter market share in 2Q03.
With sales of $1.2 billion, HP also increased its year-to-year and quarter-to-quarter revenue, 5.5 percent and 10.1 percent, respectively.
Intel and Unix Servers
When the statistics are broken down by platform, the players remain the same, but the breakdowns and order differ.
According to IDC, leading the market recovery in the U.S. has been x86-based (Intel and AMD) servers running either Linux or Windows operating systems. IDC anticipates the worldwide Linux server market will grow 34 percent, to $3.1 billion, in 2003 compared to 2002. The Windows server market is expected to grow 8 percent, to $15.0 billion.
Overall, the Intel space grew 15.5 percent in the second quarter, compared to 2Q02, to be $4.5 billion playing field, according to Gartner. Compared to 1Q03, the Intel server market grew 2.7 percent.
HP lays claim to the being the leading player in the Intel market, according to both Gartner and IDC. With sales in the $1.4 billion range, it owns about one-third of this space. Its share remained flat, however, on both a year-to-year and quarter-to-quarter basis. Market share for IBM and Dell, which also saw year-to-year revenue growth in the double digits, remained flat.
The Linux market continued its rapid growth, increasing nearly 40 percent, according to IDC. HP took nearly one-third of the market, once again; however, all three major players in this space, HP, IBM and Dell, saw tremendous year-to-year growth.
In contrast to the rapidly growing Intel and Linux server markets, the Unix space declined more than $12 billion — or about 40 percent — between 2000 and 2002, according to IDC.
“The hemorrhaging in the Unix server market is largely behind us,” said Steve Josselyn, research director, for IDC’s Global Enterprise Server Solutions. “While spending for Unix-based servers is not expected to grow over the course of the next five years, we expect enterprise customer demand to sustain this market for the near term.”
Both Gartner and IDC put Sun in the top spot in the Unix space with about $1.4 billion in revenue. The two research firms reported that Sun’s revenue declined about 20 percent year-to-year, but increased slightly when compared to 1Q03. In a year-to-year comparison, only IBM saw positive growth. From a market share perspective, Sun lost 5.7 points since 2Q02, according to IDC, and 6.6 points, according to Gartner. Quarter-to-quarter Sun grew slightly less than 2 percent.
The Server Blade Market
The nascent server blade market saw exuberant growth this quarter. Although blades represent only about 3 percent of the server unit shipments in 2Q03 with sales of 41,000 blades, IDC expects more than 2.2 million blades will ship worldwide by 2007. This will translate into about 27 percent of all new servers sold. This is a nearly seven-fold increase from 2Q02, when only only HP played in that space, and a 40 percent increase since 1Q03.
IDC reported that HP continued to lose share since it owned the market with a 53.3 percent share in 2Q02. The 31.9 percent share for 2Q03 represents an increase from the 20.9 percent share it held in 1Q03. IBM and Dell, relatively new players in the blade space, wrapped up the quarter with shares of 26.9 percent and 15.1 percent, respectively.