The server market can only go up from the pitiful levels it set in the second quarter, according to the box counters at IDC, which pegged the period from April through June as the worst in the history of the systems business.
Well, at least since 1996, when IDC has been tracking it, which is longer than we have been calling them servers.
According to estimates made by IDC and run by the server makers themselves to get the nod on their accuracy, server factory revenues (the amount of sales that the server vendors booked as they sold to customers or to their channel) declined by a stunning 30.1 per cent to $9.8bn. This is the fourth consecutive quarter of revenue declines for servers, thanks in large part to the economic meltdown and the clamping down of spending for new servers, especially among large enterprises that can and did just stop their x64 crack habits.
Chip rollouts by Intel and Advanced Micro Devices did their part to slow things down. But Moore's Law and the increasing popularity of virtualization is also crunching shipments and will continue to compress not only footprints but revenues for the foreseeable future - unless we all suddenly need a lot more computing power every two years. (The efficiencies of clouds, private or public, will also cause some compression).
"Over the past four quarters, the worldwide server market has experienced significant revenue deceleration in all geographic regions as the economic recession has deepened," said Matt Eastwood, group vice president of Enterprise Platforms at IDC, in a statement accompanying the server stats.
"Fewer servers have been shipped over the past four quarters than at any time since 2005 and it is clear that the worldwide server installed base is aging rapidly. In the weeks and months ahead, IDC believes that IT customers around the globe will begin to focus on the future once again, making strategic compute platform decisions for the next business cycle, and driving more predictable server demand as market conditions stabilize in the second half of 2009."
How long this server upgrade cycle will last? With 10 to 1 compressions from old physical servers to new virtualized machines when running infrastructure workloads, the party may not last very long. But the server makers will take whatever party they can get - that's for damned sure.
In the quarter, server unit shipments fell by 30.4 per cent, with the x64 part of the market (the lion's share of server boxes peddled for the past decade) dropping by 30 per cent to a very skinny 1.4 million units. x64 server revenues were down 28.1 per cent to $5.2bn in the second quarter of 2009, the lowest sales level since the third quarter of 2003, the peak of the last IT recession after the dot-com bust.
"While the year-over-year revenue decline is particularly steep, it should be noted that the comparison was to a strong second quarter in 2008, which had the highest second quarter revenue for the x86 market since 2004," explained Daniel Harrington, research analyst for IDC's Enterprise Server Group.
"This quarter's performance was not unexpected, and with the lack of normalcy from seasonal patterns it should be noted that unit shipments did increase quarter over quarter. IDC believes that due to constrained IT budgets, users refrained from investing what capital they had in preparation for the significant product refresh led by the latest AMD Istanbul and Intel Nehalem server CPUs, which began ramping during the quarter. Indications from the market support an optimistic view for x86 in the coming quarters."
By server type, volume systems, which cost under $25,000, saw sales fall by 30 per cent in the quarter, and high-end boxes, which cost $500,000 or more, showed a 32 per cent revenue decline. Midrange machines, which fall in between, had a 28.1 per cent decline. There was no place to hide, really. Sales of machines using various RISC, CISC, and Itanium chips that don't fall into the x64 category accounted for $4.7bn in sales in Q2, down 32.2 per cent.
For the prior six quarters, non-x64 boxes at least raked in more dough than x64 boxes, but not so in Q2. And now the question is will this be the new normal as mainframe and Unix boxes get prices slashed to compete with every more powerful x64 boxes.
Windows server sales in Q2 fell by 27.7 per cent to $3.7bn, giving Windows boxes (which are mostly x64 machines with a smattering of Itanium iron) a 38.1 per cent share of the server pie. Linux server sales, according to IDC, fell by 28.9 per cent, to $1.3bn, giving Linux a miniscule market share gain. But the decline shows that Linux is now absolutely normal, and it really should be considered Unix for cheapskates or those who never wanted expensive Unix systems in the first place but want a similar operating system.
Speaking of Unix, sales of machines running one of a handful of remaining Unixes accounted for $3.1bn in sales, down 30.9 per cent from the year ago quarter. To the eternal shame of former Unix market leaders, Sun Microsystems and Hewlett-Packard, IBM gained 7.4 points of Unix server market share in Q2, giving it a 41.4 slice of the Unix revenue pie. Sun had a 27.3 per cent slice and HP a 24.8 per cent slice, by comparison. If you consider Linux and Unix more alike than not, as I do, then you can console yourself by thinking that the Uni-Linu-x market accounted for $4.8bn in sales, considerably larger than the Windows slice but being impacted by the server crunch just the same.
The one bright spot in the server space continues to be blade servers, which only saw a 12.1 per cent revenue decline in the quarter, to $1.2bn in sales across all processor types. IBM might have gained 3.8 points of share in blades in Q2, but HP still accounted for 52.9 per cent of total sales compared to IBM's 27.2 per cent slice and Dell's 9.1 per cent slice.
By vendor revenue ranking, IBM still comes out on the top of the heap, with $3.38bn in server revenues in the second quarter, down 26.3 per cent. HP ranked number two, with $2.8bn in sales, down 30.4 per cent, followed by Dell, with $1.22bn, down 26.8 per cent. Thanks to the pending Oracle deal and all of the uncertainty that surrounds Sun's hardware biz, the company posted a 37.2 per cent revenue slide in Q2, to $981m, and Fujitsu, with sympathy pains presumably, had a 35 per cent decline of its own, to $345m. Other vendors in the server racket comprised $1.08bn in sales, down 35 per cent as well.
So Cisco Systems wants to join this racket why? Oh, right, because it owns all the networking it already can and it has no choice. IT is a nasty piece of business. ®