Server Revenue Sees Big Drop in Q4, IDC Says

Worldwide server revenue saw its biggest quarterly drop in years in the last quarter of 2008 and may not recover until next year, IDC said in a survey released on Wednesday.

Server revenue witnessed a sharp 14 percent year-over-year decline to US$13.5 billion for the fourth quarter of 2008, IDC said in a statement. The drop was partly driven by a drop in server shipments, which fell by around 12 percent during the quarter to 1.9 million units.

"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 in a statement.

Worldwide server revenue for 2008 was $53.3 billion, a 3.3 percent increase compared to 2007. For the full year, worldwide unit shipments totaled 8.1 million units, a 2 percent year-over-year increase.

The slowdown will "worsen before any improvement is seen in late 2009 or early 2010," Eastwood said. Until the recession ends, customers will focus on virtualization and workload consolidation to reduce server operating costs, Eastwood said.

Users will also continue to invest in blade servers to cut energy and system costs, IDC said. Revenue from blade servers for the quarter was $1.4 billion, a 16.1 percent growth compared to the fourth quarter of 2007. In contrast, low-end, mid-range and high-end servers saw large revenue declines during the quarter.

Low-end server recorded a massive 16.8 quarterly drop in revenue partly due weakened demand for x86 servers, IDC said. Revenue for x86-based servers declined 17 percent to $6.5 billion while shipments fell by 11.7 percent during the quarter. The falling x86 chip demand also impacted Windows based-servers, with revenue declining by 17.8 percent year-over-year to $4.8 billion.

Unix-based servers topped Windows-based server revenue, totaling $4.9 billion for the quarter, a 6.2 percent revenue decline year-over-year. Linux server revenue weakened during the fourth quarter, declining 7 percent year-over-year to $1.8 billion.

All the big server vendors saw revenue decline during the fourth quarter. IBM topped all vendors market with revenue of $4.9 billion, a 15.0 percent year-over-year decline and 36.3 market share. HP had revenue of $3.9 billion, a 10.1 percent drop with a 29 percent market share. Dell was at third place with revenue of $1.4 billion, a fall of 9.9 percent. Sun was fourth with a quarterly revenue decline of 14.1 percent to $1.2 billion, followed by Fujitsu/Fujitsu-Siemens, which saw a 14.9 percent revenue decline.

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