At face value, the global server market slumped in the second quarter of 2012, according to IDC's newest Worldwide Quarterly Server Tracker. Factory revenue fell for the third consecutive quarter, totaling $12.6 billion, a 4.8% year-over-year decline. Unit shipments were also off for the first time in almost three years, dropping 3.6%. Among major vendors, only Dell appears to have bucked the downward trend. Nevertheless, a closer look at the data suggests matters are less grim than they appear.
IDC research manager Jed Scaramella said in a phone interview that declines were foreseeable because 2011 set a challenging year-over-year benchmark. Previous market growth, he said, has cooled because many of the companies that were recently purchasing servers are now in the middle of refresh cycles. This reconciles with the soon-to-be-released results of InformationWeek's State of Server Technology survey, which found a 4% year-over-year increase in companies planning to keep their server counts static in the near term.
Scaramella stated that the new figures are still meaningful improvements compared to 2010, and that the marketplace's long-term trajectory is pointed up. Matt Eastwood, VP for IDC's Enterprise Platforms, echoed this point in a press release stating the firm "believes server demand will begin to improve in the second half of 2012 following a number of critical product refreshes."
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HP and IBM owned the biggest shares of the server market: 29.6% and 29.2%, respectively. For HP, this figure was flat relative to a year ago. The company experienced a 5% dip in revenue, however, due in part to dwindling demand for HP Integrity servers. Scaramella asserted that HP remains strong in x86 servers but faces "roadmap challenges." He said, "you cannot argue that" corporate identity issues "haven't been a factor."
IBM, meanwhile, saw its market share drop by 1.1% and its revenue decline by 8.2%. Scaramella claimed the tech giant was caught in a mid-cycle lull, with few new offerings to boost sales. He pointed to upcoming products, such as the new mainframe the company announced on August 28, as possible drivers of future growth.
Dell appears to be the big winner, capturing 16% of the market--a 14.4% uptick and the largest piece of the server pie in its history. Revenue was up nearly 6%. The combined losses of HP and IBM had to be absorbed by someone, and it's possible that Dell's healthy performance owes something to its competitors' rockier quarters. Even so, Scaramella claimed Dell earned its position. "They are pretty strong in servicing hyperscale data centers and attacking that market," he said, adding that the company was one of that sector's early entrants. Recently announced products could position Dell for sustained growth as lifecycles end and companies begin upgrading services and hardware.
Oracle and Fujitsu rounded out the top five server vendors, snaring 6% and 3.9% of the market, respectively. Each saw marked declines in revenue: 20.1% for the former and 42% for the latter. Fujitsu faced a tough year-over-year comparison, Scaramella said, because the K-Computer deal somewhat inflated 2011 figures.
IDC additionally reported that server demand was particularly depressed in Western Europe, which Scaramella attributed to economic woes, and Japan, which is not only coming off a tough comparison year, but also recovering from the March 2011 tsunami disaster. Server revenue throughout the United States and Asia grew modestly.
Revenue increased 1.7% among servers that run Linux as their primary OS. Scaramella called the Linux-based designation "less clear cut" than it used to be, due to virtualization, but said that strong performances from Microsoft, which is building data centers around a Linux-based architecture, contributed to the upsurge. Blade market revenue increased 6.3% due to a 4.1% increase in shipments, with HP (51.5% of the market), IBM (15.9%), Cisco (13.8%), and Dell (8.1%) accounting for the vast majority of sales. This growth might appear promising for otherwise troubled HP, but the blade market is still relatively small.
InformationWeek's forthcoming State of Server Technology report suggests that enterprises consider blades' headline benefits, such as smaller physical footprints and lower power consumption, to be important--but not as important as other variables, such as cost.