IDC: Power is a Server Sales Point

By Andy Patrizio

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IDC's Worldwide Quarterly Server Tracker shows a big growth in dollar sales for servers in 2006, but the number of units shipped was flat and even declined in some areas.

Factory revenue for the worldwide server market was $15.2 billion for the fourth quarter of 2006, a 5.2 percent gain over the fourth quarter of 2005, but server unit shipments were flat. For the year, server revenue grew 2 percent to $52.3 billion, while worldwide unit shipments grew 5.9 percent to 7.5 million units.

The dollar amounts pretty much jibe with what Gartner reported last week, although the unit sales differ slightly. The industry is selling less hardware, but what they are selling is more powerful.

"We've been seeing this for a couple quarters that people are shipping fewer boxes but more richly configured," Jed Scaramella, research analyst for enterprise systems with IDC, told internetnews.com. "The effects of virtualization and dual core are taking effect in the market."

This is in part due to the move to 64-bit systems for server consolidation and virtualization. A 32-bit machine can only address 4GB of memory at a time, and modern applications consume that memory very fast.

The result was server sprawl as dozens of machines were used to get around the memory limitations. "People are looking at high-end systems rather than just add a server for $2,000 and keep adding them when you need more capacity," said Scaramella.

IBM (Quote) held onto its No. 1 spot in the worldwide server systems market with 37.9 percent market share in factory revenue. However, IDC found that IBM's actual unit shipments declined by 6 percent, most of that due to declines in its x86 products.

Its mainframe business remains very strong. System z sales in Q4 were $1.7 billion, its highest level in eight years. System z sales have been up for three consecutive quarters now and accounted for 11.2 percent of all server revenue in the fourth quarter.

HP (Quote) maintained the No. 2 spot with 26.8 percent share for the quarter, a 5.1 percent growth. Sun (Quote) continued its revenue turnaround, leaping 24.4 percent over the prior year, the best of all of the companies. IDC has it tied for third place with Dell (Quote).

"The majority of their sales are still coming from existing customers, but they are getting a lot of benefit out of the try and buy program," said Scaramella. "That's another means of getting boxes in the hands of customers. And it can't be discounted that their financials have looked better and people are looking at them as a viable company again."

Linux server revenue growth took off, as well, increasing 15.3 percent to $1.8 billion over Q4 2005. Linux servers now represent 11.9 percent of all server revenue. However, Linux servers are slowing as well. After 18 quarters of double-digit shipment growth, Linux server shipments declined 0.8 percent year over year.

This article was first published on InternetNews.com. To read the full article, click here.