Server Market Descent Slows

The two bits of good news in the third quarter server market survey from Gartner is that the decline in sales and average selling prices (ASPs) has slowed considerably. The bad news is that both figures are still dropping.

Gartner reported today that worldwide server revenues fell by 15.5 percent in Q3 to $10.7 billion, and unit shipments fell at an even faster rate, down 17.1 percent, to 1.92 million units.

The bright side of it all, noted Jeffrey Hewitt, research vice president at Gartner, is that the descent has begun to slow. “It is important to put the yearly declines into perspective,” said Hewitt in a statement. “Looking at the third quarter results from the sequential perspective, they showed an increase of 13.8 percent in shipments and 10.2 percent in revenues when compared to the second quarter of this year. That suggests that the market as a whole is showing signs of stabilization as we move toward the end of 2009.”

The percentages are also considerable improvements over the second quarter, which was painful across the board, with a 30.4 percent unit decline year-over-year. So a 17.1 percent unit shipment decline is progress.

Part of the problem also has to do with currency. While the three leaders in servers – IBM (NYSE: IBM), HP (NYSE: HPQ) and Dell (NASDAQ: DELL) – are in the U.S., most of their business is overseas, and a weak dollar does them no favors.

Top Server Standings

In the third quarter, Gartner put IBM in the top spot once again in terms of revenues, with $3.38 billion in total server sales, down 12.3 per cent. Mainframe sales and Power Systems sales were off while System x sales were up. At the end of the quarter, IBM had 31.7 percent market share.

Hewlett-Packard came in at number two, with revenue off 15.1 per cent to $3.22 billion. The company holds a 30.2 percent market share slice. Dell was in third, with $1.42 billion in sales, down only 5.1 percent for 13.4 percent of the market.

Sun Microsystems (NASDAQ: JAVA) continues to suffer the worst losses, with sales down 32.3 percent in Q3 to $784.6 million. Sun’s market share has gone from 9.2 percent to 7.4 percent in just one year.

Fujitsu, which sells servers using Sun’s UltraSparc processor as well as x64 and Itanium processors, was off 10.8 percent to $550.2 million. “Other vendors” dropped 23 percent year over year to $1.3 billion in sales. These tend to be niche players, including Intel Itanium-based vendors as well as x86 providers.

x86-based servers account for 97 percent of sales, or 1.86 million units. Unit sales fell by 16.2 percent while revenues fell by 11.4 percent to $6.32 billion. It was a whole lot worse for RISC sales, which accounted for just three percent of unit sales but accounted for 25 percent of revenues.

RISC sales – primarily Sun, Itanium and IBM Power-based servers – fell 37 percent on a unit basis year-over-year and 34.8 percent on a revenue basis. What’s more, the defections to IBM and HP are really starting to show.

In the third quarter of 2008, Sun held 55.1 percent of the RISC market. In Q3 2009, it had 44.0 percent. IBM, on the other hand, went from 28.3 percent in 2008 to 33.6 percent in 2009. HP went from 12.8 percent in 2008 to 17.8 percent share in 2009 with its RISC business, primarily Itaniums.

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