Linux bucks slowing server sales

Linux servers posted their 15th consecutive quarter of double-digit growth

Global server sales put in a "lacklustre" performance evidenced by a 1.9 per cent year-over-year decline to $11.9bn in the first quarter of 2006, according to IDC's latest Worldwide Quarterly Server Tracker.

The analyst firm said that, following 10 successive quarters of year-over-year revenue growth, this was the second consecutive quarter of annual revenue decline.

However, amid all the doom and gloom, Linux servers posted their 15th consecutive quarter of double-digit growth, with year-over-year revenue growth of 17 per cent and unit shipments up 14.4 per cent.

Although IDC noted that Linux servers now represent 12.2 per cent of all server revenues, growth for the quarter was approximately half that seen in the first quarter of 2005 as the market grows and year-over-year comparisons become more difficult.

"After three years of consistent growth, the server market began to show signs of deceleration in the first quarter," said Matt Eastwood, programme vice president of worldwide server research at IDC.

"Although customers continued to invest in new infrastructure in the quarter, IT spending patterns are evolving and these shifts are clearly having an impact on the server market.

"IDC continues to see IT managers in the data centre working to strategically align the IT organisation with the business.

"Meanwhile, IT executives are focusing on condensing their IT infrastructure to deliver new IT services and enhance existing service levels while holding the line with respect to IT budgets and staffing levels."

Worldwide server unit shipment growth slowed modestly to 9.5 per cent in the first quarter of 2006 when compared with the year-ago period.

Volume server revenues grew 6.3 per cent year over year and, although this segment represents the "primary growth engine" for the overall server market, IDC's data shows that the first quarter of 2006 experienced the slowest growth in this segment for more than three years.

Revenues for midrange enterprise servers declined 16.2 per cent year over year for the second consecutive quarter, and the high-end enterprise server market showed a 3.2 per cent decline year over year, making this the sixth consecutive quarter of declining revenue for high-end enterprise servers.

Microsoft Windows servers continued to show strong growth as revenues grew 5.9 per cent and unit shipments grew 12.9 per cent year over year.

Significantly, quarterly factory revenue of $4.4bn for Windows servers represented the largest single segment of the server market, gaining 2.7 points of revenue share over the first quarter of 2005 and comprising 37.1 per cent of all server revenue in the first quarter of 2006 as customers continue to deploy more fully configured Windows servers in support of scalable workloads and consolidation projects.

In contrast Unix servers experienced a 7.1 per cent decline in factory revenues year over year, while unit shipments declined 8.7 per cent when compared with the first quarter of 2005.

Worldwide Unix revenues of more than $3.9bn for the quarter represented 33.2 per cent of overall quarterly factory revenue.

Epic or Itanium-based systems enjoyed 41.8 per cent year-over-year growth generating $640m in revenue for the quarter and now representing 11.2 per cent of all non-x86 server revenue.

Regionally, Epic experienced the greatest year-on-year growth in Asia/Pacific (excluding Japan) and Western Europe.

In terms of vendor performance IDC found that HP and IBM tied for the number one position with 28.1 per cent and 27.9 per cent share respectively, with IBM losing .5 points of share and HP gaining .4 points.

Dell maintained third place in terms of revenues with 11.1 per cent market share in the first quarter of 2006. Although Dell's year-over-year revenue growth slowed to 3.6 per cent for the quarter, the company still gained market share in the quarter.

Sun Microsystems experienced 5.8 per cent year-over-year revenue growth in the first quarter of 2006 and increased its overall market share to 10.8 per cent from 10 per cent in the first quarter of 2005.

"Sun's server revenue growth and market share gains are an indication that the company's most recent product strategies are beginning to resonate with customers," said Steve Josselyn, research director for enterprise server research at IDC.

"While the majority of Sun's server revenue is driven by traditional UltraSPARC IV and UltraSPARC IV+ systems, the introduction of the Niagara-based chip, multithreaded machines and Opteron-based x-64 Galaxy products have begun to generate significant customer interest."

Fujitsu/Fujitsu-Siemens maintained fifth place in terms of factory revenue, with 6.9 per cent market share in the quarter.