Despite Challenges, Server Market Grew in Q1

Gartner on Thursday said that worldwide server sales continue to grow at
a decent pace in 2008 despite US economic conditions, with revenue outpacing
units as the trend toward more decked out machines continues.

Server sales also continue to grow despite the growing popularity of
virtualization, which would seem to indicate a need for
fewer boxes
. Gartner found the opposite. “We’ve had the proliferation of x86
virtualization technology, which potentially allows people to consolidate,
and they can consolidate if they wish, but there is still strong growth,”
noted Jeffrey Hewitt, research vice president at Gartner.

“People are still interested in a growth scenario where they are
installing more servers as we go along,” he said. “We’re seeing a lot more Web content coming online and a lot of Web-based interface on mobile devices providing access to the Web. The back-end has to grow to power all that.”

Worldwide sales rose 4.3 percent to $13.6 billion, with overall unit
sales up 7.6 percent to 2.3 million units. The three biggest items in the
report are the fantastic growth in blades, HP passing IBM in revenues and
Dell’s impressive comeback.

Blades continue to be the hottest seller, as sales rose 55 percent, from
$838 million in Q1 of 2007 to $1.3 billion in Q1 2008. HP and IBM (NYSE:
IBM) continue to lead the field, with Sun (NASDAQ: JAVA) in the third spot.

HP (NYSE: HPQ) took the overall revenue share lead over IBM in 2008, with
$4.010 billion in revenue compared to IBM’s $3.912 billion. HP’s revenue
grew by 10.3 percent compared to IBM’s 2.1 percent growth. HP’s primary
strength is in ProLiant servers, while IBM did have a good quarter in its
mainframe business thanks to the new z10 mainframes, according to Hewitt.

Dell (NASDAQ: DELL) grew its marketshare by 6.6 percent in Q1 but its
unit sales were up 15.8 percent, easily outpacing HP and IBM. “It does show
that they’ve come back in terms of execution,” Hewitt told “They seemed to be struggling for a while. I think
this bodes well for them getting back on track, and shows they are doing a
better job of improving their product line.”

Sun Microsystems had a minor revenue drop of 0.7 percent but unit growth
of 6.6 percent. “They are trying to get more new customers for Solaris, and
that’s a tough job that will take some time and effort. It’s not an easy job
for them,” said Hewitt.

Fujitsu/Fujitsu Siemens was in the usual fifth place spot, with 4.9
percent year-over-year revenue growth and a 2.6 percent loss of unit share.

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