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


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Solid quarter for HP

HP’s server shipments grew 8.7
percent over the second quarter of 2007, and revenue grew 2.9 percent. The
market share gap between it and second-place Dell decreased 3.4 percentage
points for the quarter, but no worries in Palo Alto. HP still owns 30.2 of
the market, and it’s still a huge success in blades, holding 45.2 percent of
that market.

For RISC, which is primarily Intel’s Itanium and Sun’s UltraSPARC, the
news is not so good. RISC-Itanium Unix servers fell 7.9 percent in shipments
but grew 9.4 percent in revenue, which is great for more decked-out systems
but reflects the dwindling interest in RISC processors.

“The RISC market is constrained,” Hewitt said. For Sun it’s worse because
its x86 product isn’t catching fire to offset RISC losses. Year over year,
RISC sales declined from $1.6 billion in 2007 to $1.4 billion in 2008, while
x86 Sun hardware rose from $203 million to $218 million.

“I am yet to be convinced they are luring new customers,” Hewitt said. “I
think Sun with its UltraSPARC and x86 has not been effectively selling
outside their traditional customer base.”

For the rest of 2008, Hewitt forecasts a repeat of this quarter, with
single-digit revenue growth and single- to double-digit unit growth, with
particular strength in the emerging markets.

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