HP, IBM Watch Server Revenue Drop as Recession Settles

As the financial crisis continues and as the United States officially enters a recession, top server vendors Hewlett-Packard and IBM watched their revenue drop in the third quarter of 2008. In addition to HP and IBM, Dell and Sun Microsystems watched their server revenue fall in the third quarter. In terms of shipments, HP and Dell managed to increase their share.

The ongoing financial crisis and concerns about the overall health of the economy in the United States had a big impact on the worldwide server market in the third quarter of 2008, with revenues declining 5 percent from a year ago.

All five of the world's major server vendors-Hewlett-Packard, IBM, Dell, Sun Microsystems and Fujitsu/Fujitsu Siemens-watched their revenues from server sales fall in the third quarter, according to a Dec. 1 report from Gartner. Overall, worldwide server revenue stood at $12.7 billion in the third quarter, compared with the $13.4 billion the market saw a year ago.

While revenues fell, server shipments increased more than 4 percent for a total of about 2.3 million units. The Gartner report found that buyers put off purchasing more expensive Unix systems, while the average selling prices of commodity, x86 servers continued to drop.

Shipments of Unix, RISC and Itanium servers dropped 16 percent in the third quarter, while revenue from these systems fell nearly 11 percent, according to the Gartner survey.

The Gartner report came on the same day that the National Bureau of Economic Research, a nonprofit research organization, declared that the United States had officially entered a recession.In the weeks leading up to the Dec. 1 announcement, several research firms, including Gartner and IDC, cut their IT spending outlook for 2009. Many enterprises are already looking to cut back on hardware purchases, especially PCs and servers.

IBM continued to dominate the market in terms of revenue, as the company recorded revenues of $3.9 billion in the third quarter of 2008, thanks to sales of its Power Systems and System z mainframes. However, Big Blue's revenue fell 4 percent from a year ago, when the company posted revenue of more than $4 billion, according to Gartner.

HP's server revenue fell nearly 4 percent to $3.8 billion, while Dell watched its server revenue decline 5 percent to $1.5 billion. Sun took the biggest hit, with revenue declining about 13 percent from $1.3 billion in the third quarter of 2007 to $1.2 billion during the third quarter of this year.

Fujitsu/Fujitsu Siemens's revenue fell about 7 percent to $616 million.

In terms of shipments, HP led all five of the major vendors, shipping more than 724,000 system units in the third quarter. That was an increase of 11 percent compared with the third quarter of 2007. During the quarter, HP increased its shipments of its x86-based ProLiant systems and increased its overall blade server shipments by 3.9 percent.

Dell finished second to HP, shipping more than 500,000 servers during the quarter, an increase of about 3 percent.

IBM watched its shipments drop 3.5 percent for a total of 308,524 units shipped during the third quarter of 2008. Sun's shipments increased about 3 percent for a total of 81,522 units, and Fujitsu/Fujitsu Siemens' shipments decreased 3.8 percent for a total of 73,578 units, according to Gartner.