FRAMINGHAM, Mass.----According to IDC's Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market grew 6.3% year over year to $13.1 billion in the second quarter of 2007. This is the fifth consecutive quarter of positive revenue growth and the highest Q2 server revenue since the market peaked in 2000. After three years of slowing unit shipments growth, server shipments grew 6.1% year over year in 2Q07 driven by an improved refresh cycle and an expansion of new distributed computing workload deployments across the market.

Volume systems represented the primary driver for market growth in 2Q07 with revenue growth improving to 11.0% year over year in the second quarter, which is the highest growth rate for this critical market segment since 3Q05. Revenue for midrange enterprise servers increased 0.2% year over year and the high-end enterprise server market showed a 1.7% increase year over year. This is the third consecutive quarter that all three server market segments have experienced positive revenue growth.

"The server market not only continues to experience solid growth, but revenue growth has accelerated over the past seven quarters. Although x86-based systems are once again the primary driver for overall market growth, continued growth in other market segments demonstrates that a single standardized infrastructure is not capable of meeting the full range of needs in today's modern enterprise," said Matt Eastwood, group vice president of Enterprise Platforms at IDC. "Enterprise customers of all types continue to focus on driving business growth. This growth drives new computing demands, which increasingly require both scale-up consolidated systems and scale-out distributed configurations to meet very different workload needs in today's enterprise."

Overall Server Market Standings, by Vendor

IBM held onto its number 1 spot in the worldwide server systems market with 31.0% market share in factory revenue for 2Q07, growing factory revenue by 6.4% year over year. This growth was driven by solid performance from its System x, System z, and System p servers. HP maintained the number 2 spot with 28.2% share for the quarter, growing revenue 8.0% compared to 2Q06. HP’s growth stemmed from strong ProLiant server and BladeSystem performance. Sun grew server revenue 5.6% year over year and maintains the number 3 ranking with 13.1% factory revenue market share in the quarter. Sun continues to experienced strong demand for its T1000 and T2000 Niagara-based systems as well as its x86 offerings. Although it continues to hold the number 4 position in the market, Dell experienced the most robust growth of any leading vendor growing factory revenue 20.2% year over year as its new enterprise strategy shows business progress.

Top-Level Server Market Findings

• Linux servers posted the fifth consecutive quarter of accelerating revenue growth, with year-over-year revenue growth of 19.0%, for a total of $1.8 billion in the quarter. Linux servers now represent 13.6% of all server revenue, up from 12.1% a year ago.
• Microsoft Windows server revenue was $5.0 billion in 2Q07, showing 18.7% year-over-year growth and gaining 4.0 points of revenue market share over 2Q06 and comprising 38.2% of all server revenue in the quarter. Windows servers account for the single largest segment of spending, by operating system, in the worldwide server market.
• Unix servers experienced a modest 4.0% revenue decline when compared with 2Q06. The high-end enterprise segment of the Unix market was strongest of all three segments volume, midrange enterprise and high-end enterprise, as worldwide Unix revenues totaled $4.2 billion in 2Q07, representing 31.7% of quarterly server spending. Unix servers account for the second-largest segment of spending, by operating system in the worldwide server market.
• IBM's System z servers running z/OS experienced the fifth consecutive quarter of positive revenue growth, with 4.0% year-over-year growth in 2Q07 to $1.2 billion. IBM mainframes running the z/OS operating system Z/OS accounted for 9.5% of all server revenue in 2Q07, and IBM System z was the only platform outside of Linux and Windows to experience positive revenue growth in the quarter.
• The market for non-x86 servers, including servers based on RISC, EPIC, and CISC processors, declined 2.3% year over year in 2Q07, from $6.4 billion in 2Q06 to $6.3 billion in 2Q07. IBM maintained its leadership position, posting 45.8% share, in this segment over Sun Microsystems 23.9%, Hewlett Packard 20.7%, and Fujitsu/Fujitsu Siemens 4.8% respectively, based on factory revenue. IBM grew revenue 2.8% during the quarter on the strength of sales for System z mainframes 4.0% growth and RISC-based System p machines 7.2% growth. HP lost about 0.9 points of share in this segment as revenues declined 6.2%, while Sun gained 0.9 points of share with a 1.3% increase in revenue for the quarter.

"Sun maintained its leadership position in the Unix market posting slight growth, but gaining 1.6% points of share, while IBM remained in second position by growing 6.7% and gaining 3.1% points in year-over-year comparisons," said Steve Josselyn, research director for Enterprise Platforms at IDC. "Sun remains committed to expanding the Unix ecosystem as evidenced by the recent agreement with IBM to support Solaris on System x. While we still believe that spending for Unix-based servers will decline over time, the competition for leadership between the top suppliers for the largest share of this $4 billion in quarterly spending is expected to remain heated for some time."

x86 Server Market Dynamics

x86-based systems experienced their fastest growth rate in seven quarters, as x86 server market growth accelerated in 2Q07, growing 15.5% year over year to $6.9 billion worldwide. Unit shipment growth also continued with a healthy gain of 7.8% to 1.8 million servers as x86 systems were deployed for an increasing array of enterprise workloads in both datacenter and distributed environments. HP led the market with 35.1% x86 revenue share, as Dell held second place with 22.2% revenue share and IBM was in the third position with 17.5% revenue share.

Blade Server Market Shows Strong Shipment and Revenue Growth

For the third consecutive quarter, the server blade market showed signs of acceleration, with factory revenue growing 36.7% year over year. Overall, bladed servers, including x86, EPIC, and RISC blades, accounted for $875 million in the second quarter, representing 6.7% of quarterly server market revenue. While HP held the number 1 spot in the blade market with 47.2% market share and IBM held the number 2 position with 32.3% share, HP grew 71.9% year over year, gaining 9.7 points of revenue market share over 2Q06.

"Blade servers continue to be the fastest growing segment of the worldwide server market. Customers are increasing their blade deployments and vendors are broadening the blades product portfolio," said Jed Scaramella, research analyst in IDC's Enterprise Computing group. "IDC believes blades are in the next wave of product evolution and customer adoption. As IT organizations become more familiar with the platform, they are able to deploy blades in IT environments that are suited to take advantage the management capabilities, as well as the cost and serviceability benefits."

IDC's Worldwide Quarterly Server Tracker, August 2007

IDC's Server Taxonomy

IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers servers priced less than $25,000, midrange enterprise servers $25,000 to $499,999, and high-end enterprise servers $500,000 or more. The revenue data presented in this release is stated as factory revenue for a server system. IDC presents data in factory revenue to determine market-share position. Factory revenue represents those dollars recognized by multi-user system and server vendors for ISS and upgrade units sold through direct and indirect channels and includes the following embedded server components: Frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments.

IDC's Worldwide Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly shipments both ISS and upgrades and revenues both customer and factory, segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture. For more information, please contact Hoang Nguyen at 508-935-4718 or hnguyen at idc.com.

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