IDC: Server Market Continues Overall Growth

The research firm reports strong overall revenues for the fifth consecutive quarter, but the midrange market struggles.

The worldwide server market continued to expand in the second quarter, analyst firm IDC said in a report Friday that mirrored findings by Gartner Inc. earlier this week.

According to IDC, the server market grew 6.9 percent, to $11.5 billion in revenue. It marked the fifth consecutive quarter of overall revenue growth, according to the Framingham, Mass., firm.

The growth was driven by the high-end market—which showed a 6.1 percent increase in revenues—and the low-end volume space, which grew 21 percent. Much of the demand in the low-end space—servers less than $25,000—was fueled by demand for blade systems and two-way servers, according to IDC. The firm also singled out IBMs zSeries mainframe business, noting that revenue for its OS/390 servers grew 40.6 percent, to almost $1.5 billion, thanks in large part to hardware enhancements and price cuts over the past 18 months.

But the midrange market—systems priced between $25,000 and $499,999—faltered, with revenues dropping 11.7 percent over the same period last year.

"IT spending remained strong overall, with server consolidation activities continuing to drive demand for high-end systems," analyst Matt Eastwood said in a prepared statement. "The pattern in spending during the quarter demonstrates the bifurcation of the server marketplace, with growth at both the high and low ends of the computing spectrum."

IDC said that server shipments grew 22.7 percent over the second quarter in 2003, fueled by the high growth in the volume server space. Linux-based server revenue grew 48.9 percent and shipments jumped 38.2 percent, while systems running Microsoft Corp.s Windows operating system increased 13.2 percent and 25.3 percent in revenue and shipments, respectively. The Linux market will continue to expand with the release of the 2.6 kernel, the analysts said.

Unix server shipments grew 20.2 percent, though revenue dropped 3 percent.

Overall, IBM, of Armonk, N.Y., remained in the top spot, generating more than $3.7 billion in revenue, an 11.7 percent increase over the year-ago quarter, while growing its market share from 31.1 percent a year ago to 32.5 percent in the second quarter.

Hewlett-Packard Co., of Palo Alto, Calif., was second, with $3.1 billion in revenue, which represented a 4.6 percent increase. Sun Microsystems Inc., of Santa Clara, Calif., generated more than $1.4 billion, for a .2 percent increase, followed by Dell Inc., of Round Rock, Texas, which generated $1.05 billion, an 11.2 percent increase.

Fujitsu Ltd., of Tokyo, rounded out the top five, with $575 million in revenue, a 5.7 percent increase.

In its report Wednesday, Gartner, of Stamford, Conn., said server revenue grew to $11.5 billion, which it said was a 7.7 percent increase. More than 1.6 million servers were shipped, according to Gartner.


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