While Hewlett-Packard and IBM were virtually tied for first place when it came to server revenue in the 2008 third quarter, both companies watched their overall revenue drop as the financial crisis continued. HP, IBM, Dell, Sun Microsystems and Fujitsu all lost server revenue in the third quarter despite demand for blade servers and IBM's System z mainframe, according to IDC.
tied for first place when it came to server revenue in the third
quarter of 2008, both companies, along with most other OEMs, watched
their overall system revenues decline thanks to the ongoing financial
crisis, according to IDC.
In its Dec. 3 report on the worldwide server market, IDC found that
revenue declined more than 5 percent year over year. In the third
quarter of 2008, server revenue stood at $12.6 billion compared to
$13.3 billion the industry saw in the third quarter of 2007. Server
shipments increased a modest 2.8 percent during the quarter.
While HP and IBM were virtually tied for fist place on the server
revenue list, both IT giants watched their revenue slip from a year
ago. In the third quarter, HP recorded overall server revenue of $3.86
billion, a decline of 2 percent, while IBM tallied $3.81 billion in
revenue, a 3 percent decline from the third quarter of 2007.
The IDC report came the same week that Gartner also found that worldwide server revenue decreased about 5 percent year over year.
Both research firms found that the financial crisis and the troubles on
Wall Street, which started to pick up steam in September, have played
havoc with IT budgets, and businesses large and small are now looking to cut back on their IT hardware spending.
At the same time, a report issued this week by a non-profit economic research firm
found that the United States is now officially in a recession.
"IT decision makers were pressured to cut costs where they
could and that included putting the stops on some potentially expensive higher
end server products," Daniel Harrington, an analyst with IDC,
wrote in an e-mail to eWEEK.
"While revenue was down slightly, lower cost, x86 servers
still experienced positive unit growth for the quarter," Harrington added. "With
the exception of IBM's System z line, higher-end, non-x86 products had considerable unit decline. End-users are looking to
these lower cost solutions to meet their needs."
While the third quarter showed server revenue declining,
Harrington added that fourth quarter would give an even better indication of
how much or how little businesses would spend on IT hardware in 2009.
While IDC found that demand for blade servers and large systems such
as the IBM System z mainframe was still strong, demand for other types
of servers slipped.
For example, revenue from x86 servers fell more than 6 percent,
although shipments increased. At the same time, revenue from Unix
systems fell 8.4 percent, according to IDC.
On the other hand, revenue from all types of blade servers increased
nearly 30 percent for a total of $1.4 billion during the quarter. HP
now controls 54.7 percent of the overall blade market compared to IBM's
23 percent market share.
For IBM, sales of its mainframe helped ease the impact from the
financial crisis. IBM watched its revenue from mainframes running the
company's z/OS operating system increase 25 percent. IDC attributed the good numbers to pent-up demand for new System z mainframes that IBM brought to market earlier this year.
After HP and IBM, Dell watched its server revenue slip 4.3 percent
for a total of $1.5 billion for the quarter. Of the five largest OEMs,
Sun experienced the largest loss during the quarter. The company's
server revenues fell nearly 11 percent from $1.3 billion to $1.2 billion.
Fujitsu/Fujitsu-Siemens produced server revenue of $647 million
during the quarter, a decrease of 8.4 percent. All other OEMs combined
watched their revenues fall more than 12 percent, according to IDC.
Editor's Note: This article was updated to include comments from an IDC analyst.