IDC is the latest research firm to provide validation that the server market has begun to recover from multiple quarterly losses in 2009, although like rival analysts firm Gartner reported, IDC found that the recovery is lopsided: The x86 server business is booming while the non-x86 business is busting.
According to IDC's Worldwide Quarterly Server Tracker for the first quarter of 2010, server unit shipments in the first quarter of 2010 rose 23.3 percent over Q1 2009, while revenues increased just 4.7 percent, an indication that there is still price pressure on servers. This represents the highest quarterly growth rate in five years, according to IDC.
The quarter was pretty much carried by x86 server revenue, which grew 33.6 percent while shipments increased 25.6 percent to 1.8 million servers. Non-x86 systems, meanwhile, shrank by 25.9 percent year-over-year.
The growth is also lopsided in terms of what types of servers are selling. Volume systems -- those under $25,000 -- were the only ones with year-over-year revenue growth. They were up 31.9 percent. Midrange enterprise systems revenue between $25,000 and $250,000 declined 19.0 percent and high-end systems -- costing more than $250,000 -- declined 28.9 percent. This is the sixth consecutive quarter that both the midrange and high-end server segments of the server market have experienced a year-over-year revenue decline.
As a result, the server market is basically being pulled along by low-end x86 systems while everything else is still in decline. But that's par for the course coming out of an economic downturn, according to Jean Bozman, research vice president with IDC.
"People are adding capacity in smaller increments," she told InternetNews.com. "It used to be people would roll in $100,000, $200,000, $500,000 servers. Now you can add it in these smaller increments. Because of virtualization, you can provision workloads on that new hardware. So they are just adding capacity in bite-sized chunks."
That may change going forward, however, she added.
"If you look a little further out, these mid-range servers will start to move because [enterprises] need greater scalability," she said.
The Unix market was also hit with a lot of change all at once. Sun went through nine months of uncertainty before it was finally acquired by Oracle (NASDAQ: ORCL). Still, its revenues fell 31.9 percent year over year. (Since the deal closed, Oracle CEO Larry Ellison has been fairly clear with his intentions around Sun's server business: He intends to focus on the high end of the market and leave the low-cost server business to the other guys.
Meanwhile, IBM (NYSE: IBM) came out with the powerful new POWER7 processor but didn't make it widely available, and HP (NYSE: HPQ) made a shift to the new Itanium 9300 processor in its Integrity and Superdome servers.
These expensive servers all have longer planning and buying cycles than a $5,000 server, with customers more willing to hold off if something new is coming, or if there is uncertainty. IDC expects Unix systems and more expensive systems in general to pick up later this year, though.
"We do expect a certain amount of platform migration to take place, but the smoke hasn't cleared yet," Bozman said.
HP, IBM, Dell Dominate
The list of top five vendors remains dominated by HP, followed by IBM and then Dell (NASDAQ: DELL), with Fujitsu and Sun now tied in fourth place. (Gartner had earlier put Fujitsu ahead of Sun.) Bozman said the kicker for Fujitsu was that its x86 server business has really started to grow, something the company has been pushing both in the U.S. and in its native Japan for a while.
Demand for Microsoft Windows Server products grew 28.3 year over year on a unit basis, while Linux demand was up 36.5 percent. Linux servers now represent 18.4 percent of all server revenue, up 4.3 points over the same quarter last year. Unix server revenue declined 29 percent from a year earlier.
The blade server market continues to make its own gains, up 20.8 percent on a unit basis year over year. Overall, blade servers account for 13.6 percent of quarterly server market revenue and will hit 20 percent in a few years, Bozman added.
(Updated to reflect revised numbers provided by IDC.)