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According to the International Data Corporation (IDC), factory revenue in the worldwide server market increased 17.9% year over year to $13.2 billion in the second quarter of 2011 (Q2 2011). This is the sixth consecutive quarter of year-over-year revenue growth, as server market demand continued to improve around the world.
Double Digit Revenue Growth Continues in Q2
"Server market growth accelerated in Q2 2011 and experienced its highest reported second quarter revenue in three years with all geographies contributing to the positive year-over-year growth. This was the fifth consecutive quarter with double-digit year-over-year revenue growth as the market recovery continued to extend from x86 servers to midrange Unix to high-end mainframe class systems," said Matt Eastwood, group vice president of enterprise platforms at IDC.
Server unit shipments increased 8.5% year over year in Q2 2011 to 2.1 million units, which is the second highest quarterly total ever reported in the second calendar quarter of any year. Improved market conditions were seen across all three server classes -- volume, midrange enterprise, and high-end enterprise.
Volume systems experienced a 16.6% year-over-year revenue increase, the seventh consecutive quarter of positive growth for the segment. Midrange enterprise demand improved for the fourth time in the past five quarters, with a 16.7% year-over-year revenue increase. Finally, the improving market conditions extended to the high-end enterprise segment, as quarterly revenue increased 22.8% when compared to Q210. This is the second consecutive quarter that all three segments of the server market have experienced a year-over-year revenue increase in the same quarter.
"While Q211 was an exceptionally strong quarter, attention has already turned to the market outlook for the second half of the year. IDC believes that weakening macroeconomic conditions around the world will serve to moderate demand for new servers later this year," added Mr. Eastwood.
IBM and HP Remain on Top, Command Over Half of the Market
IBM and HP jointly held the number 1 position in the worldwide server market with 30.5% and 29.8% factory revenue share respectively for Q2 2011, a statistical tie.
IBM experienced 24.5% year-over-year growth in factory revenue gaining 1.6% of share in the quarter on the performance of System x, Power Systems, and System z.
HP's factory revenue grew 9.3% year over year in Q2 2011 based on solid demand for x86-based ProLiant servers and blades.
Dell maintained third place with 13.8% factory revenue market share in Q2 2011. Dell's factory revenue increased 5.1% compared to Q2 2010, driven in part by strong demand from SMB customers.
Oracle and Fujitsu jointly held the number 4 position with 7.2% and 6.5% factory revenue share, respectively, in Q2 2011.
Oracle's Q2 2011 factory revenue increased 4.2% compared to Q2 2010, driven in part by improved demand for x86-based Exadata systems.
As a direct result of the large scale K-computer HPC system in Japan, Fujitsu experienced a sizable 133.6% year-over-year improvement in server revenue.
Top Server Market Findings
The market for non-x86 servers, including servers based on RISC, EPIC (Itanium-based), and CISC processors, increased 23.3% year over year to $4.8 billion in Q2 2011. This is the third consecutive quarter in which non-x86 servers have exhibited positive growth and the second consecutive quarter that non-x86 based system revenue has grown faster than the market overall. Growth in non-x86 server revenue was driven by improved demand for Unix servers and IBM System z platforms.
Unix servers experienced a second consecutive quarter showing year-on-year factory revenue improvement, growing 1.5% when compared to Q2 2010. Unix server revenues were $2.9 billion, representing 22.0% of quarterly server revenue in the quarter. IBM's Unix server revenue increased 14.0% year over year in the quarter, as IBM gained 6.0% of Unix server market share.
IBM's System z servers experienced the fourth consecutive quarter of positive revenue growth, with 61.1% year-over-year growth in Q2 2011 to $1.2 billion, representing 9.0% of quarterly server revenue worldwide. This was the fourth consecutive quarter that IBM System z revenue exceeded $1 billion, driven by new product introductions and demand for capacity within the IBM installed base.
Linux server demand increased for the seventh consecutive quarter in Q2 2011, with revenue growing 47.5% to $2.7 billion when compared with the second quarter of 2010. Linux servers represent 20.5% of all server revenue in the quarter as Linux server demand was helped significantly by Fujitsu's large scale K-computer HPC system in Japan.
Microsoft Windows server demand also continued to show strong growth as Windows-based hardware revenue increased 12.4% year-over-year. Quarterly revenue of $5.9 billion for Windows servers represented 45.5% of overall quarterly factory revenue and 71.0% of all quarterly server shipments.
"The Unix server marketplace is seeing some rebound in revenue, based on technology refresh for Unix server products from all major vendors. This segment was hard-hit in 2009 and 2010 during the economic downturn as customers deferred or delayed acquisition of midrange and high-end Unix servers. Now, many mission-critical workloads need more room for workload consolidation, and user demand for long-deployed applications and databases is growing. This move to expand capacity in the installed base is combined with net-new demand from customers who are building out new infrastructure," said Jean S. Bozman, research vice president of enterprise servers at IDC.
Bladed Server Market Results
The blade market continued its solid growth in the quarter with factory revenue increasing 26.9% year over year and shipment growth increasing by 6.2% compared to Q2 2010. Overall, bladed servers, including x86, EPIC, and RISC blades, accounted for $2.0 billion in revenues, representing 15.2% of quarterly server market revenue.
Nearly 89% of all blade revenue is driven by x86-based blades, which now represent 21.2% of all x86 server revenue. HP maintained the number 1 spot in the server blade market in Q2 2011 with 51.9% revenue share, while IBM finished with 19.1% revenue share. Cisco and Dell rounded out the top 4 with 10.0% and 8.2% factory revenue share, respectively.
"Blade revenue growth accelerated in the second quarter and remained the fastest growing form factor. All major vendors experienced double-digit growth in their blade business. In terms of the x86 market, the blade segment performed particularly well, accounting for 21.2% of x86 revenue - the highest proportion since their introduction into the market. Blades continue to be a strategic element in vendor portfolios commanding a higher average sales value and providing an opportunity for pull-through revenue," said Jed Scaramella, research manager of enterprise servers at IDC.
x86 Industry Standard Server Market Dynamics
Demand for x86 servers continued to improve in Q2 2011, with revenues growing 15.1% in the quarter to $8.4 billion worldwide as unit shipments increased 5.4% to 1.9 million servers.
HP led the market with 38.1% revenue share based on 14.4% growth over 2Q10. Dell retained second place, securing 21.7% revenue share, while IBM now holds 16.1% revenue share. Overall, this was the ninth consecutive quarter with year-over-year increases in average selling prices (ASPs) for x86 servers. This is occurring as both the mix of systems and average system configurations continue to move up-market, driving generally higher product margin for x86 ecosystem players. Additionally, this was the seventh consecutive quarter of year-over-year factory revenue growth for x86 servers.
"x86 servers continue to drive the majority of the server market, and x86 revenues are consistently outperforming unit growth on a quarterly basis. This market trend will continue as customers look at consolidating more workloads onto servers that are configured with increased memory attach rates and higher priced processors to provide systems capable of improving performance and efficiency," said Reuben Miller, senior analyst in IDC's enterprise servers group.