IBM rides high-end demand to top of server market

IBM rides high-end demand to top of server market

Despite reporting no growth in unit shipments the server industry had record revenue in 2006

Swelling demand for high-end systems in the fourth quarter pushed the global server industry to its highest annual revenue since the market peaked in 2000, as IBM and HP held onto their top rankings.

The industry overcame yet another quarter of slumping unit shipments to notch a 5.2 per cent rise in quarterly revenue compared to the same period last year, pushing annual industry revenue up 2 per cent to $US52.3 billion in 2006, according to an industry report released by IDC.

The revenue came from an unexpected sector. For the first time in 10 years, quarterly demand for mid-range and high-end systems outstripped demand for volume servers. Compared to the same period last year, fourth quarter revenue for high-end systems rose 11.5 per cent, compared to rises of 5.4 per cent for midrange servers and 2.1 per cent for entry-level.

Despite the changing market, the players remained the same. IBM claimed the largest chunk of revenue with 32.8 per cent market share, followed by HP at 27.2 per cent. With 10.8 per cent share, Sun Microsystems has a slight lead over Dell (10.3 per cent) for third place, but is growing much faster, IDC said.

Fujitsu/Fujitsu Siemens was the only vendor whose server revenue dropped in 2006 as it held onto its position in a distant fifth place. Those numbers were nearly identical to a server industry report released last week by Gartner.

IBM said much of its success came from its 32 per cent share of the large Unix server segment and from strong growth in its System z mainframe sector, which posted its highest quarterly revenue in eight years with $US1.7 billion, according to a statement by Bill Zeitler, senior vice-president and group executive for IBM's Systems & Technology Group.

Despite that success, IBM's Z/OS recorded just 11.2 per cent market share by revenue in the quarter, far behind Microsoft's Windows OS at 34.9 per cent and the Unix OS at 33.5 per cent, according to IDC. Linux-powered servers showed fast growth to reach 11.9 per cent share.

In comparison, Sun boasted that its results were strong in every sector, lead by total server revenue growth of 24.4 per cent, more than four times the growth of its closest competitor, HP.

Although the vendors might be pleased with their 2006 revenue, IDC warned they should be worried about slumping demand. The industry stumbled to its tenth consecutive quarter of slowing growth in units shipped, grinding to a halt with no growth in the fourth quarter of 2006. The main culprit is virtualisation, as corporate IT managers learn to save money by sharing a shrinking pool of hardware resources. That trend has hit the x86 segment the hardest, putting a dent in revenue for chipmakers such as Intel and Advanced Micro Devices.

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