Server Sales Plunge in Q1


IDC‘s Worldwide Quarterly Server Tracker paints a pretty bleak picture for the server vendors, with business off 24.5 percent from last year, falling to $9.9 billion in the first quarter of 2009.

This is the third consecutive quarter of year-over-year revenue decline and the lowest quarterly server revenue since IDC began tracking the server market on a quarterly basis 12 years ago.

Even at a time when Intel (NASDAQ: INTC) has its new Nehalem processors and AMD (NYSE: AMD) has its new “Shanghai” Opteron family out, servers are just not moving. Unit shipments declined even further than sales, down 26.5 percent year-over-year. This is the lowest quarterly server shipment total in five years and the largest ever year-over-year quarterly server unit decline.

One of the reasons for the decline, according to IDC analyst Dan Harrington, is that a problem of the industry’s own making.

“A lot of projects are on hold, and they are able to do that through the use of virtualizing,” he told “They spread workloads and virtualize more than they were before. It’s not the total reason for a decline but that was an aspect of it.”

Volume systems saw the greatest decline, with revenue down 30.5 percent. Midrange enterprise demand was down 13.6 percent and the high-end enterprise segment was off 19.5 percent. All three groups were measured on a revenue basis, and measured year-over-year.

The reason mid-range held up better than the others is that blade servers continued to have the best momentum. Unfortunately, that category’s growth also went negative — the first time blade systems experienced negative growth. Factory revenue declined 14.4 percent and unit shipments fell 18.1 year-over-year. HP maintained the No. 1 spot in the blade market with 52.2 percent market share for the quarter.

IBM and HP jointly held the top spot in terms of market share, with 29.3 percent each. HP held the lead in dollars, but by the slimmest of margins, $2.91 billion to $2.90 billion. IBM’s System p and System z high-end systems did better than any other products, according to Harrington.

Dell took it on the chin, with revenue falling 31.2, the biggest drop of the companies tracked. Harrington said it was due to Dell’s aggressive price competition and not having a high-end, non-x86 business, which did better overall than x86 business. Perhaps not surprisingly, Dell posted grim numbers today for its first fiscal quarter for the year.

Unix server revenue fell 17.5 percent, again showing strength in the middle to high-end, while IBM’s System z mainframes slipped just 18.9 percent year-over-year. Windows-based server revenue was off 28.9 percent and Linux revenue dropped 24.8 billion.

[cob:Special_Report]The forecast for this year is equally bleak. Harrington thinks Q2 will be as bad as Q1 and there won’t be positive movement until the first quarter of 2010.

By Q4 of 2009, IDC expects the numbers to be flat to down five percent — but that would be compared to Q4 2008 numbers, which were already dismal.

“I don’t see anything to indicate there’s going to be a big comeback in any quarter,” Harrington said.

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