Gartner: Dell Suffers 'Atypical' Decline in 1Q Server Revenue

Dell, which has been aggressively cutting prices in a competitive market, suffered a server revenue drop of 2 percent in the first quarter of 2006, according to numbers reported by Gartner Tuesday.

Worldwide server shipments for the first quarter of 2006 increased 13.7 percent over the same quarter last year while average worldwide server revenue remained flat, the research firm said.

Worldwide server revenue totaled $12.4 billion in the first quarter of 2006, compared with $12.3 in the first quarter last year. Worldwide server shipments totaled nearly 2 million units in the first quarter of 2006, up from 1.7 million units in the same period last year.

In a statement, Gartner said Dell's revenue drop for the period was "atypical." Dell's shipments increased 7.1 percent in the same period, a rate lower than Hewlett-Packard, IBM and Sun Microsystems.

Sun, meanwhile, returned to server revenue growth for the first time in almost two years, driven by increases in its UltraSPARC and its Opteron-based server revenue.While Dell, which focuses on x86 servers, appears to have been dealt a slight setback, the RISC-Itanium category suffered a bigger beating.

Jeffrey Hewitt, research director at Gatner said in a statement that x86 servers continue to show positive growth while RISC-Itanium server sales continue to drop. RISC-Itanium Unix servers fell about 0.9 percent in shipments for the quarter but dropped a more significant 5.1 percent in revenue.

"The decline at the high end and the replacement at the low end with Linux on x86 servers continue to put negative pressure on this portion of the market,” Hewitt said.

Blade servers also showed strong growth again, with volumes increasing 46 percent over the same period last year, according to Gartner. IBM holds the leading market position in blade servers in volume and revenue terms, Gartner said.

IBM continued to lead the worldwide server market based on revenue. However, the company's revenue decreased 3.7 percent in the first quarter, while the total market remained flat for the same period. IBM’s revenue decline was driven primarily by drops in its iSeries, pSeries, and zSeries lines. Its x86-based servers outperformed the market, growing 11 percent in revenue for the quarter to provide a degree of counterbalance to the decline.In server shipments, HP retained its lead in the first quarter and posted yearly growth of 8 percent. However, this was lower than the overall industry shipment increase of 13.7 percent. HP’s ProLiant servers grew 8.3 percent while HP Integrity Itanium servers grew 29.9 percent for the quarter.