Blades are server market's bright spot, says IDC

Enterprises pay higher prices for blade servers while still shunning Unix systems

While total 2009 server sales still remain below last year's totals, IDC's quarterly tracker report released today indicates that worldwide demand for the systems among enterprise customers may finally be increasing.

The IDC report on the worldwide server market showed that blade server revenues increased by 1.2% year-over-year in the third quarter -- the first server category to show positive growth this year. This revenue growth occurred even though shipments of blade servers declined by 14% from the year-earlier period.

IDC noted that blade server prices have increased by 10% over the past two quarters, which explains the revenue hike while overall shipments declined. The price increase was attributed to the use of new components in many blade servers. The new components include Intel's new Nehalem server chips, the Istanbul Opteron processor from Advanced Micro Devices and added support for DDR3 memory. The new technologies improve the ability of blade servers to handle more virtualization workloads.

"The revenue increase in blade servers is a sign that enterprises are beginning to spend again on technology, said Daniel Harrington, an analyst at IDC. "That's a good sign for the market."

Meanwhile, IDC said that sales of Unix servers continue to slump, as revenue declined by 23.4% compared to the year-ago quarter. But Harrington did note that enterprises tend to upgrade large Unix systems in the fourth quarter.

Overall, third quarter worldwide server revenue declined by 17.3% year-over-year to $10.4 billion. The period was the fifth consecutive quarter that year-over-year server revenue declined, but IDC added that sales passed the previous quarter for the first time since the fourth quarter of 2008.

Server unit shipments declined 17.9% year over year in the third quarter -- well below the 30% decline the second quarter. And, IDC added, third quarter unit shipments were up a "healthy" 12.4% from the second quarter.

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