Worldwide Server Market Revenues Decline 4.8% in Second Quarter as Market Demand Softens, According to IDC
On a year-over-year basis, volume systems experienced a 2.5% revenue decline. At the same time, demand for midrange and high-end systems experienced year-over-year revenue declines of 11.2% and 7.6% respectively in 2Q12. All three segments were impacted by difficult year-over-year compares combined with transitions in the technology refresh cycles.
"Worldwide server revenue declined for the third consecutive quarter in 2Q12 as the market continued working its way through a number of technology transitions impacting customer demand for x86, Unix, and mainframe class systems. That said, it is also clear that economic uncertainty is weighing on the market and the sales cycle is lengthening," said Matt Eastwood, group vice president and general manager, Enterprise Platforms at IDC. "Regionally, server demand in Western Europe and Japan was particularly soft while server revenue in the U.S. and Asia/Pacific managed to grow modestly. It is important to note that IDC believes that server demand will begin to improve in the second half of 2012 following a number of critical product refreshes which continue to be announced."
Overall Server Market Standings, by Vendor
HP and IBM jointly held the number 1 position in the worldwide server market with 29.6% and 29.2% factory revenue share respectively for 2Q12, a statistical tie*. IBM experienced a 8.2% year-over-year decline in factory revenue losing 1.1 points of share in the quarter on soft demand for System x, Power Systems, and System z ahead of a number of major product transitions. HP's factory revenue declined 5.0% year over year in 2Q12 based on flat sales for x86-based ProLiant servers offset by continued declines in HP Integrity server demand. Dell maintained third place with 16.0% factory revenue market share in 2Q12. Dell's factory revenue increased 5.9% compared to 2Q11 helping Dell to its highest-ever server market share in any quarter. Oracle maintained the number 4 position with 6.0% factory revenue share; Oracle's 2Q12 factory revenue decreased 20.1% compared to 2Q11. Fujitsu ended the quarter in the number 5 market position with 3.9% factory revenue share. Facing a tough yearly compare from the K-computer HPC deal in 2Q11, Fujitsu server revenue declined 42.1% year over year.
Top Server Market Findings
Linux server demand continued to be positively impacted by high performance computing (HPC) and cloud infrastructure deployments, as hardware revenue increased at 1.7% year over year to $2.8 billion in 2Q12. Linux servers now represent 22.1% of all server revenue, up 1.4 points when compared with the second quarter of 2011.
Microsoft Windows server demand was up 0.3% year over year in 2Q12 with quarterly server hardware revenue totaling $6.0 billion representing 47.9% of overall quarterly factory revenue, up 2.4 points over the prior year's quarter.
Unix servers experienced a revenue decline of 20.3% year over year to $2.3 billion representing 18.4% of quarterly server revenue for the quarter. IBM's Unix server revenue declined 10.0% year over year; however IBM still managed to gain 6.1 points of Unix server market share when compared with the second quarter of 2011.
The market for non-x86 servers, including servers based on RISC, EPIC (Itanium-based), and CISC processors, declined 19.4% year over year to $3.9 billion in 2Q12. This is the fourth consecutive quarter in which non-x86 servers have exhibited a revenue decline. Non-x86 based systems now comprise 30.6% of the server market.
"The Unix server market is in between generation refresh cycles, and continues to be hampered by workload consolidation and migration to other platforms," said Kuba Stolarski, research manager, Enterprise Servers at IDC. "IDC expects the Unix market to stabilize over the next few years and remain a smaller, specialized segment of the overall server market, catering primarily to customers who are looking for high levels of availability and stability in a scale-up architecture."
x86 Industry Standard Server Market Dynamics
Demand for x86 servers continued to improve in 2Q12, with revenues growing 3.5% in the quarter to $8.7 billion worldwide as unit shipments were down 0.6% to 1.9 million servers. This was the first decline in x86 server shipments since 3Q09. HP led the market with 36.4% revenue share based on a 0.2% revenue decline when compared to 2Q11. Dell retained second place, securing 23.1% of revenue share while gaining 0.5 points of share when compared with the second quarter of 2011. IBM rounded out the top three positions, holding 14.3% revenue share following a 7.4% year-over-year revenue decline. Overall, this was the twelfth time in the previous thirteen quarters with a year-over-year increase 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.
Bladed Server Market Results
The blade market continued its solid growth in the quarter with factory revenue increasing 6.3% year over year and shipment growth increasing by 4.1% compared to 2Q11. Overall, bladed servers, including x86, EPIC, and RISC blades, accounted for $2.1 billion in revenues, representing 16.9% of quarterly server market revenue, a record high. More than 90% of all blade revenue is driven by x86-based blades, which now represent 22.1% of all x86 server revenue. HP maintained the number 1 spot in the server blade market in 2Q12 with 51.5% revenue share, while IBM finished with 15.9% revenue share. Cisco and Dell rounded out the top 4 with 13.8% and 8.1% factory revenue share, respectively.
"IDC is observing a increasing trend towards form factor specialization in the market, as both blade and density optimized servers continue to outperform the general market," said Jed Scaramella, research manager, Enterprise Servers at IDC. "Together, blade and density optimized servers grew 15% in annual revenue and now represent 22% of the market. These modular form factors are expected to continue to gain adoption, with blades targeting virtualized environments in enterprises and density optimized servers targeting large-scale homogeneous environments in datacenters."
IDC's Server Taxonomy
IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers, midrange servers and high-end servers. The revenue data presented in this release is stated as factory revenue for a server system. IDC presents data in factory revenue to determine market share position. Factory revenue represents those dollars recognized by multi-user system and server vendors for ISS and upgrade units sold through direct and indirect channels and includes the following embedded server components: Frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments.
IDC's Worldwide Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and factory), segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture.
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