Intel, AMD Chips Help Fuel Server Market Rebound, IDC Says

After hitting bottom in the second quarter, the worldwide server market began to rebound in the third quarter, according to IDC. Intel's release of its Nehalem EP processor and AMD's new "Istanbul" Opteron chip helped fuel the recovery in the x86 server space, a key driver in the overall systems market, IDC said.

The worldwide server market, hammered by the global economic recession, began to stabilize in the third quarter and promises to continue to rebound in the fourth quarter and into next year, according to research firm IDC.

In quarterly numbers released Dec. 2, IDC said that while global server revenue and shipments declined 17.3 percent and 17.9 percent, respectively, over the third quarter in 2008, both grew significantly over the second quarter of this year.

"[The server market] hit bottom in Q2, and in Q3 rebounded," IDC analyst Daniel Harrington said in an interview. "The stabilization of the market is really the story here."

IDC's findings mirror those of analyst firm Gartner, which released its quarterly server numbers Dec. Nov. 30. Gartner also found that year-over-year numbers were still behind last year's results, but jumped from the second quarter.

The volume server space-specifically, the x86 server market-was the key driver in the third-quarter rebound, fueled by Intel's release in March of its quad-core "Nehalem EP" Xeon processor for systems with two sockets, Harrington said.

That release was soon followed by Advanced Micro Devices' six-core "Istanbul" Opteron chip.

The recession was a key culprit in persuading enterprises to restrict spending on new data center hardware, but so was the promise of what the new processors offered in terms of performance and virtualization capabilities, he said.

Nehalem also offered businesses a return on investment of less than a year, an attractive proposition for enterprises with an aging fleet of servers. The new chips-and the systems in which they appear-gave enterprises a reason to begin spending again on servers.

"It's really an enterprise story," Harrington said of the server market over the past few quarters. "A lot of the freezing [of IT budgets] was enterprise-related. They had enough infrastructure to freeze everything for a half-year and get by. But when you're talking about volume stuff, about x86 servers that have life cycles of three to four years, when they're 6 years old, it's tough."

According to IDC, IBM and Hewlett-Packard were in a statistical tie for the market lead, with 31.8 percent and 30.9 percent revenue market share, respectively. Both vendors, as well as Dell, Sun Microsystems and Fujitsu, saw revenues decline over the same period last year, though revenue did grow over the second quarter. IBM was helped by sales of its System x and p systems, while Dell saw strong sales through its Datacenter Solutions business, according to IDC.

Sun was hampered by the delayed acquisition by Oracle, as customers are holding off on buying systems until they get a clearer product road map.

Blade servers also showed strong growth, with revenue increasing 1.2 percent year over year, though shipments dropped 14 percent.

"Customers are leveraging blade technologies to optimize their environments in response to the pressure of the economic downturn and tighter budgets. Blade technologies provide IT organizations the capability to simplify their IT while improving asset utilization, IT flexibility and energy efficiency," IDC analyst Jed Scaramella said in a statement.

The blade market also was helped by the release of the Nehalem EP Xeon 5500 Series chips, IDC said.