In-Depth

Big Blue Still Sitting Pretty Atop Server Market Heap

IBM Corp. is server market king—thanks to the strong performance of Big Blue’s System x, System p, and System z platforms

• By Stephen Swoyer
• 03/06/2007

One sign of IT’s faith in their future: Server revenues at an encouraging clip—to $15.2 billion, according to market watcher International Data Corp. (IDC). IBM Corp. is once again tops in IDC’s server market tally—thanks, the researcher says, to the strong performance of Big Blue’s System x, System p, and System z platforms.

This marks the third consecutive quarter in which server revenues have nudged upward, IDC says. At the same time, the researcher concedes, Q4 server shipments were flat in comparison with last year’s totals, while server revenues for the year grew at a comparatively anemic 2 percent, reaching $52.3 billion.

On the whole, however, IDC researchers are upbeat. They note, for example, that worldwide unit shipments grew 5.9 percent (to 7.5 million units) during Q4. Moreover, IDC says, the server market itself posted its highest annual revenue since 2000 (its all-time peak).

“It is clear that both large and small organizations across the world are investing aggressively to simplify and virtualize their IT infrastructures,” said Matthew Eastwood, program vice president of IDC's Worldwide Server Group, in a statement. “For the first time in more than 10 years average selling values … in the quarter increased year over year as IT managers move[d] to consolidate IT workloads. This shift towards a shared compute infrastructure is driving additional scalability, memory attachment, and I/O needs, which in turn, lead to higher [average selling values].”

For the year, volume server sales grew by 2.1 percent, IDC says. If that seems like paltry growth for a segment that’s traditionally been a catalyst for overall server market growth, it is: Q4 of 2006 was the first quarter in the 10-year history of IDC’s Worldwide Quarterly Server Tracker that both midrange and high-end server revenue outpaced that of the volume segment.

Q4 marked a turnaround of sorts for the midrange segment, in particular: after four consecutive down quarters, midrange enterprise server revenue increased 5.4 percent year over year. High-end server revenues, for the record, were up 11.5 percent year over year—the second consecutive quarter of revenue growth.

For the quarter, IBM was number one in overall server revenues, with 37.9 percent market share (and 3.8 percent year over year growth), IDC says. The researcher specifically singles out System z, which it says had another encouraging quarter, growing 5 percent year-over-year to $1.7 billion. That’s the highest quarterly total for System z in 8 years and is one reason why System z accounted for 11.2 percent of all server revenues in Q4.

“IBM's solid System z revenue growth comes as a result of a significant amount of turnover in the installed base as customers look to take advantage of the performance and reduced cost structures available in both the System z EC … and the System z BC," said Steve Josselyn, a research director with IDC's Enterprise Computing group, in a statement. “This is an indication that many customers still view investment in System z as an integral component of their IT infrastructure.”

Hewlett-Packard Co. (HP) was number two overall, with 26.8 percent share for the quarter. HP demonstrated strong year-over-year growth—5.1 percent—and, perhaps in vindication of its oft-decried purchase of the former Compaq Computer Corp., realized much of its growth from strong sales of Proliant servers. Elsewhere, HP surely benefited from an unprecedented uptick in sales of Itanium-bases systems, too: EPIC or Itanium server revenue grew by 71.5 percent year-over-year, generating more than $1.1 billion in revenue, according to IDC. That marks the first time Itanium has exceeded $1 billion in revenue in a quarter.

While Sun Microsystems Inc. and Dell Computer Corp. are locked in a statistical tie for third place, IDC specifically cites Sun’s continuing momentum: the Unix giant grew its revenues 24.4 percent year-over-year and held a 9.7 percent share in Q4. That translates into an increase of 1.5 points of share over the year-ago quarter, IDC says. Dell’s was a less salutary Q4, growing its revenue by 2.4 percent compared to the year-ago- quarter and finishing with 9.4 percent revenue share.

Elsewhere, IDC finds, reports of Microsoft Corp.’s imminent demise—be it at the hands of Google Inc., open-source software, or other interested parties—could in fact be greatly exaggerated. Windows server revenues grew by 9.4 percent during Q4, while unit shipments grew by 5.1 percent year-over-year. Most importantly, the researcher indicates, Q4 Windows server revenues ($5.3 billion) accounted for 34.9 percent of overall quarterly factory revenue; that’s the single biggest revenue segment in the marketplace entire.