"The server market experienced its sharpest decline since the middle of the dot-com slowdown nearly seven years ago. All server vendors, geographies, and technology segments were impacted significantly as the global recession gained momentum and market conditions weakened as the quarter progressed," said Matthew Eastwood, group vice president of IDC's Enterprise Platforms Group.

"It now appears the slowdown will worsen before any improvement is seen in late 2009 or early 2010. In the near term, IT customers will increasingly look for IT optimization projects with strong ROI potential and extend virtualization, consolidation, and migration programs in order to lower capital and operational costs while improving efficiencies."

Overall server market standings, by vendor
All of the top five server vendors saw year-over-year declines in their quarterly server revenue and in their annual server revenue, the first time this has happened since first quarter of 2002.

IBM held onto its number 1 spot in the worldwide server systems market with 36.3 percent market share in factory revenue for 4Q08, as its revenue declined 15 percent year over year. Although IBM experienced significant weakness in System x, demand for power-based systems improved in the quarter.

HP maintained the number 2 spot with 29 percent share for the quarter as its revenue declined 10.1 percent compared to 4Q07. HP was helped by a relatively strong October during its fiscal year end. Dell maintained third place with 10.6 percent factory revenue market share in 4Q08. Dell experienced a 9.9 percent revenue decline compared with 4Q07, while fourth place Sun experienced a year-over-year revenue decline of 14.1 percent in 4Q08 to 9.3 percent market share.

Fujitsu/Fujitsu-Siemens, experienced a 14.9 percent decline in factory revenue holding 4.2 percent revenue share in 4Q08.

Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, Full Year 2008

IDC's Worldwide Quarterly Server Tracker, February 2009