Server Market Sustains Historic Declines, Gartner Says

As the worldwide recession took hold late last year and into the first quarter of 2009, shipments and revenues for the global server market plummeted by 24 percent each, according to Gartner. IBM remained the top revenue generator, and HP sold the most units in a quarter plagued by economic deterioration and businesses drastically cutting back their IT budgets. Gartner analysts said 2009 will be a difficult year for server makers, though the second half should show a slight improvement.

The worldwide server industry, battered by the global recession, experienced historic declines in the first quarter, according to research firm Gartner.

Echoing what counterpart IDC found in its first-quarter report May 28, Gartner June 1 reported that server revenue declined 24 percent worldwide in the first quarter from the same period in 2008, and shipments dropped 24.2 percent.

Gartner analyst Jeffrey Hewitt said the results in the first quarter was an extension of what happened in the fourth quarter last year, and that 2009 was going to be a weak year for the market, with growth not returning until 2010.

"While this [first-quarter drop] was not unexpected, the severity of the decline was greater than predicted on a worldwide level," Hewitt said in a statement.

All segments of the market were hit. Shipments for x86-based systems fell 23.9 percent, while revenues dropped 27.1 percent, Gartner found. For Unix servers, those numbers were a 31.3 percent decline in shipments and 20.4 percent drop in revenue.

In a Gartner video, analyst Errol Rasit said it was the x86 market that has gotten hurt the most by the economic downturn. In the first quarter, "we saw volumes fall off the cliff the quickest and the most severe," Rasit said.

However, the second half of the year could be better, and when the recovery does take hold, he said the x86 market will see the most rapid improvement over the Unix and mainframe spaces, where prices are higher and buying cycles longer.

IBM generated the most server revenue, with $3.1 billion in revenue and a market share of 30.7 percent. While market share was up for IBM, revenue dropped 20.4 percent.

The other top five server makers-Hewlett-Packard, Dell, Sun Microsystems and Fujitsu-saw similar revenue declines.

HP was tops in server shipments, selling 530,849 units for a 30.8 percent share. But HP, like the other four top server makers, saw a huge dip in shipments from the same period in 2008.

Rasit, the Gartner analyst, said that businesses that had already cut back on its purchases are now cutting back the money for server maintenance, and IT administrators are turning to such tools as x86 virtualization technology to consolidate their systems and extend the life of their servers.