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Server Sales Healthy Despite Consolidation Trend

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Worldwide server shipments rose by 8.7 percent on a unit basis and 2.6 percent on a dollar basis for the third quarter of 2007 over the same quarter last year, according to the latest research from Gartner. Worldwide server revenue totaled $13.4 billion for the quarter, with just over 2.2 million units shipped.

If the upward trend continues it would contradict some predictions that server consolidation and virtualization would cause a dip in buying. Gartner was expecting to see an impact, too.

“We were thinking that the market would be slower due to virtualization, but it hasn’t shown that in this quarter, and some other markets have shown rapid growth, particularly the emerging regions,” Lillian Alvarado, senior analyst in Gartner’s server markets team told “There probably has been some effect but you can’t see it because the market is still growing strong.”

Leading the way on the revenue side once again was Big Blue, although IBM actually saw sales decline year over year. Third quarter 2007 sales were $4.0 billion, down 8.1 percent from $4.3 billion in 2006. System p and System x sales rose while System z (its most expensive servers) and System i declined.

HP led the way in both unit shipments and revenue growth. Unit shipments skyrocketed 20.2 percent in the quarter. Its closest competitor in terms of unit growth was Fujitsu/Siemens, which gained 17.4 percent on the previous year. However, Fujitsu sold 76,606 units while HP sold 649,958 servers, almost ten times as many.

HP is also coming within striking distance of IBM’s sales. For the quarter, it reported sales of $3.75 billion, up 13.9 percent over the prior year. HP had 28.1 percent of total sales to IBM’s 30.1 percent.

Alvarado said x86 sales have been driving the market, and HP has one of the most recognized brand names in x86 servers, the ProLiant line. But what really helped has been a huge investment in HP’s channel strategy.

“They have done a lot of things to improve their sales,” said Alvarado. “They have revamped their channels, they have invested a lot to get to market in a faster way and they are reaping the benefit of those strategies.”

Dell is enjoying a bit of a recovery as shipments grew by 5.4 percent, giving it 21.8 percent of the overall server market to HP’s 29.3 percent and IBM’s 14.3 percent. Dell’s quarterly revenue of $1.52 billion was a 12.6 percent improvement over last year and represented 11.8 percent of the total revenue for the quarter.

Sun Microsystems is also improving, with an 11.4 percent growth in revenue even though there was a 4.5 percent decline in server unit shipments. The revenue growth was due to Sun’s focus on the high end of the market, where margins are higher.

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