Server sales post biggest jump since 2003, IDC says

IDG News Service - Worldwide server sales posted their biggest jump since 2003 during the second quarter as Hewlett-Packard outsold rival IBM to take the top spot among server vendors, IDC said Tuesday.

Server revenue rose 11 percent during the second quarter, to US$10.9 billion. These numbers marked the second consecutive quarter of revenue growth for the server market and the fastest pace of growth since 2003, IDC said.

"The growth that we're seeing is coming predominantly from servers in the volume space," said Jean Bozman, research vice president for enterprise servers, in a phone interview. IDC defines volume servers as systems costing less than $25,000.

Despite strong second-quarter growth, worldwide server revenue is still below historic highs recorded in 2008 due to double-digit declines in 2009 sales, Bozman said, citing the effect of the economic downturn.

"Things are moving in the right direction," she said.

Demand for volume and mid-range systems -- which IDC defines as servers costing between $25,000 and $250,000 -- was strong, posting revenue growth of 32 percent and 16 percent, respectively, compared to the same period last year, IDC said. But demand for high-end systems, which cost $250,000 or more, sagged during the second quarter, with revenue dropping 27.2 percent -- the seventh consecutive quarterly decline.

The growth in demand for mid-range servers was particularly notable, Bozman said. "The mid-range was one of the segments, along with the high end, that were most adversely affected by the downturn because they had higher price tags," she said

The big winners during the second quarter during top-ranked HP and No. 3 Dell, which saw server revenue rise 26 percent and 37 percent, respectively. IBM, which fell to second place from the top spot one year ago, saw second-quarter revenue slip 3.2 percent.

HP's quarterly server revenue was $3.5 billion while IBM's revenue came in at $3.2 billion. IBM, which was the top-selling server vendor throughout 2009, also held the No. 2 spot behind HP during the first quarter of 2010.

IBM's revenue was lower in part due to slower sales of its Power Systems and System z servers as customers waited for updated versions of these products to hit the market.

"They were releasing a new product, that was just announced a week ago, so there was some delay in demand from customers," Bozman said, noting that the release could translate into higher sales for IBM during the second half of the year.

Demand for IBM's x86-based System x servers remained strong during the second quarter.