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Global server market revenue up 12pc in 1Q11

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CIOL Bureau
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FRAMINGHAM, USA: According to the International Data Corporation (IDC) Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market increased 12.1 per cent year-over-year to $11.9 billion in the first quarter of 2011 (1Q11).

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This is the fifth consecutive quarter of year-over-year revenue growth, as server market demand continued to improve around the world. Server unit shipments increased 2.5 per cent year over year in 1Q11 to 1.9 million units, which is the second highest quarterly total ever reported in the first calendar quarter of any year.

Also Read: 'Cisco wasn't crazy when it announced UCS'

Improved market conditions were seen across all three server classes -- volume, midrange enterprise, and high-end enterprise. Volume systems experienced an 8.7 per cent year-over-year revenue increase, the sixth consecutive quarter of positive growth for the segment.

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Midrange enterprise demand improved for the third time in the past four quarters, with a sharp 28.3 per cent year-over-year revenue increase. Finally, the improving market conditions extended to the high-end enterprise segment, as quarterly revenue increased 14.2 per cent when compared to 1Q10.

 Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, First Quarter of 2011 (Revenues are in Millions)

Vendor

1Q11 Revenue

1Q11 Market Share

1Q10 Revenue

1Q10 Market Share

1Q11/1Q10 Revenue Growth

1. HP

$3,754

31.5%

$3,387

31.8%

10.8%

2. IBM

$3,489

29.2%

$2,857

26.9%

22.1%

3. Dell

$1,862

15.6%

$1,697

16.0%

9.7%

4. Oracle

$773

6.5%

$681

6.4%

13.6%

5. Fujitsu

$578

4.8%

$685

6.4%

-15.6%

Others

$1,473

12.3%

$1,332

12.5%

10.6%

All Vendors

$11,929

100%

$10,639

100%

12.1%

IDC's Worldwide Quarterly Server Tracker, May 2011

This is the first time in eight quarters that all three segments of the server market have experienced a year-over-year revenue increase in the same quarter.

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"Meaningful enterprise infrastructure refresh occurred across all geographies in the quarter. Although the public sector weakened, worldwide demand for servers across hosters, SMBs, and enterprise customers remained strong. This was the fourth consecutive quarter with double-digit year-over-year revenue growth as the market recovery extended from x86 servers to midrange Unix to high-end mainframe class systems for the first time in nearly three years," said Matt Eastwood, group vice president, Enterprise Platforms at IDC.

"This is evidence that heterogeneous systems remain critically important to customers addressing a wide range of workload needs in their datacenters. As we moved into 2011, IDC predicted the technology refresh cycle would extend from volume- to value-oriented systems with somewhat longer planning horizons, and this is clearly happening."

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Overall Server Market Standings, by Vendor

HP held the number 1 position in the worldwide server market with 31.5 per cent factory revenue share for 1Q11. HP's 10.8 per cent revenue growth was led by improved demand for both x86-based ProLiant servers and Itanium-based Integrity servers.

IBM held the number 2 spot with 29.2 per cent share for the quarter as factory revenue increased 22.1 per cent compared to 1Q10 and gained 2.4 points of share from a year ago.

IBM experienced significant improvement for its Power Systems, while demand for System z servers and x86-based System x servers also remained strong. Dell maintained third place with 15.6 per cent factory revenue market share in 1Q11 factory revenue increased 9.7 per cent compared to 1Q10 driven in part by strong demand from SMB customers.

Oracle, which completed the one-year anniversary of its Sun Microsystems acquisition on January 27, maintained the number 4 position with 6.5 per cent factory revenue share in 1Q11.

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Oracle's 1Q11 factory revenue increased 13.6 per cent compared to 1Q10, driven in part by improved demand for SPARC-based servers. Fujitsu rounded out the top five with 4.8 per cent factory revenue share following a 15.6 per cent year-over-year decline in server revenue.

Finally, IDC initiated coverage of Cisco's UCS server platform in the 1Q11 Server Tracker. Cisco maintained 1.6 per cent factory revenue share overall, with particular strength in x86-based blades in North America.

Top Server Market Findings

The market for non-x86 servers, including servers based on RISC, EPIC (Itanium-based), and CISC processors, increased 12.3 per cent year-over-year to $4.0 billion in 1Q11.

This is the second consecutive quarter in which non-x86 servers have exhibited positive growth and the first time in two years that non-x86 based system revenue has grown faster than the market overall.

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Growth in non-x86 server revenue was driven by improved demand for Unix servers and IBM System z platforms.

Unix servers experienced the first quarter showing year-on-year factory revenue improvement in 11 quarters, growing 12.5 per cent when compared to 1Q10. IBM, HP, and Oracle all experienced improvement in Unix server revenue in the quarter, as worldwide Unix revenues were $2.6 billion, representing 21.8 per cent of quarterly server revenue.

IBM's System z servers running z/OS experienced the third consecutive quarter of positive revenue growth, with 41.1 per cent year-over-year growth in 1Q11 to $1.0 billion, representing 8.8 per cent of quarterly server revenue worldwide.

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This was the third consecutive quarter that z/OS system revenue exceeded $1 billion.

Linux server demand increased for the sixth consecutive quarter in 1Q11, with revenue growing 16.6 per cent to $2.0 billion when compared with the first quarter of 2010. Linux servers now represent 16.9 per cent of all server revenue, up 0.7 points over 1Q10.

Microsoft Windows server demand also continued to show strong demand as Windows-based hardware revenue increased 10.1 per cent year-over-year. Quarterly revenue of $5.8 billion for Windows servers represented 48.5 per cent of overall quarterly factory revenue and 75.2 per cent of all quarterly server shipments.

"The Unix server marketplace is seeing new market dynamics centered on technology refresh for mission-critical workloads; a new provider in Oracle, and a new product set across all of the top four Unix server vendors," said Jean S. Bozman, research vice president, Enterprise Servers at IDC.

"This segment was hard-hit in 2009 and 2010 during the economic downturn as customers deferred or delayed acquisition of midrange and high-end Unix servers. There is also continuing competition for enterprise workloads with non-Unix platforms. However, as IDC projected, there has been a return to growth in this segment in 2011, as customers' servers are being refreshed to carry forward Unix-specific, mission-critical workloads."

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Bladed Server Market Results

The blade market continued its strong growth in the quarter with factory revenue increasing 23.8 per cent year-over-year, with shipment growth increasing by 5.4 per cent compared to 1Q10.

Overall, bladed servers, including x86, EPIC, and RISC blades, accounted for $1.8 billion in revenues, representing 15.2 per cent of quarterly server market revenue. Nearly 90 per cent of all blade revenue is driven by x86-based blades, which now represent 20.5 per cent of all x86 server revenue.

HP maintained the number 1 spot in the server blade market in 1Q11 with 50.0 per cent revenue share, while IBM finished with 20.2 per cent revenue share. Cisco and Dell rounded out the top four with 9.4 per cent and 8.4 per cent factory revenue share, respectively.

"Blade vendors fared well in the quarter, with the blade revenue growing at twice the rate of the total market. Blades represent a higher-value sale for server vendors, being increasingly deployed in converged systems to support virtual environments. The larger memory footprints and I/O interconnects needed have resulted in a continual increase in average selling prices for blade systems," said Jed Scaramella, Research Manager, Enterprise Servers at IDC.

"After several years of being a highly consolidated market where the top 3 vendor accounted for over 80 per cent of blade revenue, the recent entry of Cisco has introduced a viable new competitor to the market."

x86 Industry Standard Server Market Dynamics

Demand for x86 servers continued to improve in 1Q11, with revenues growing 12.0 per cent in the quarter to $7.9 billion worldwide as unit shipments increased 2.6 per cent to 1.9 million servers.

HP led the market with 37.7 per cent revenue share based on 11.6 per cent growth over 1Q10. Dell retained second place, securing 23.5 per cent revenue share, while IBM now holds 16.4 per cent revenue share.

Overall, this was the eighth consecutive quarter with year-over-year increases in average selling prices for x86 servers as both the mix of systems and average system configurations continue to move up-market, driving generally higher product margin for x86 ecosystem players.

Additionally, this was the sixth consecutive quarter of year-over-year factory revenue growth for x86 servers with particular strength in Asia/Pacific and CEMA.

"As virtualization adoption matures in the x86 server market, IDC sees customers moving from consolidation towards more automated private cloud models for their IT needs. This drives a shift in focus towards lowering the cost per application through higher virtual machine server densities," said Reuben Miller, senior analyst in IDC's Enterprise Servers group.

"As x86 server technologies continue to improve efficiencies, customers are seeing increased benefits from moving more of their IT workloads to x86 servers."

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