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Worldwide Server Market Experiences Modest Growth in Fourth Quarter as Market Revenues Reach Seven-Year High in 2007, According to IDC


FRAMINGHAM, MA . - According to IDC’s Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market grew 2.4% year over year to $15.7 billion in the fourth quarter of 2007 (4Q07), marking the seventh consecutive quarter of positive growth. Worldwide server unit shipments grew 9.0% in 4Q07 when compared with the year-ago period. For the full year 2007, worldwide server revenue grew 3.6% to $54.4 billion, while worldwide unit shipments grew 6.7% to 8.0 million units. This represents the highest annual server revenue since the market peaked in 2000 with factory revenue of more than $61.6 billion.

Volume systems revenue grew 8.2% year over year and the segment continues to be the catalyst for growth in the server market overall, gaining favor with SMB and enterprise customers alike. Midrange enterprise server revenue experienced negative growth for the fourth consecutive quarter, declining –0.5% year over year while the high-end enterprise server market had similar results with –5.7% year-over-year revenue growth.

“Server demand remained strong across most major market segments in the fourth quarter driven by a continued shift towards modularization as customers expand and refresh their IT infrastructures while embracing blade computing as well as scale-out and scale-up server technologies,” said Matthew Eastwood, group vice president of IDC’s Enterprise Platforms Group. “As the market continues to look for signs of an economic slowdown, spending for new IT projects could be impacted. However, IDC believes that recent gains in both system performance and manageability will continue to drive consolidation, virtualization and other infrastructure refresh projects where changing datacenter economics help CIOs build defensible business cases necessary for continued strategic IT investment.”

Overall Server Market Standings, by Vendor

IBM held onto its number 1 spot in the worldwide server systems market with 36.7% market share in factory revenue for 4Q07, growing factory revenue by 0.5% year over year. This growth was driven by solid performance from its System x and System p servers. HP maintained the number 2 spot with 27.7% share for the quarter, growing revenue 6.3% compared to 4Q06. HP’s growth stemmed from strong ProLiant and Integrity server performance. Dell and Sun ended the quarter in a statistical tie for third place with factory revenue market share of 10.1% and 9.3% respectively. Dell experienced 6.8% revenue growth compared with 4Q06, while Sun experienced a year-over-year revenue decline of 2.4% in 4Q07. Fujitsu/Fujitsu- Siemens, experienced a 7.1% increase in factory revenue holding 4.3% revenue share in 4Q07.

Top Server Market Findings

* Microsoft Windows servers showed positive growth as revenues grew 6.9% and unit shipments grew 9.8% year over year. Quarterly revenue of $5.7 billion for Microsoft Windows servers set an all-time high for a single quarter and represented the single largest revenue segment in the server market with 36.6% of overall quarterly factory revenue.

* Unix servers experienced 1.5% revenue growth year over year when compared with 4Q06. Worldwide Unix revenues were $5.2 billion for the quarter, representing 33.3% of quarterly server spending and reflecting continued IT investment in this server market segment, with particular strength in the midrange enterprise segment of the Unix market which comprises 53.8% of all Unix spending.

* Linux server revenue reached $2.0 billion for the first time in any single quarter on 11.6% year-over-year growth. Linux servers now represent 12.7% of all server revenue, up more than 1 point over 4Q06.

“Fourth quarter Unix market results were mainly driven by IBM’s strong System p business as customers continue to support the Power RISC platform,” said Steve Josselyn, research director, Enterprise Computing research at IDC. “IBM’s Power RISC technology remains a driving force behind ongoing IT investment in Unix-based systems as they posted 0.9% point share gain in 4Q07 and a 2% point share increase in year-over-year comparisons for 2007.”

“Growth in the top three operating-system segments of the server market, by revenue—Windows, Unix and Linux—underscores the diversity of the workloads that are running in customer sites, and the continuing demand for all three operating environments in the worldwide server marketplace,” said Jean S. Bozman, research vice president, IDC Enterprise Computing Group. “All three environments compete for workloads in the Internet infrastructure, Web 2.0, high performance computing (HPC), and enterprise computing spaces.”

x86 Industry Standard Server Market Dynamics

The x86 server market continued to grow in 4Q07, increasing 7.6% in the quarter to $7.8 billion in worldwide revenues. Unit shipment growth also accelerated, growing a healthy 10.3% year-over-year to 2.1 million servers as customers continued to refresh and expand their IT infrastructures. For the full year 2007, worldwide x86 server revenue grew 10.4% to $28.7 billion, while worldwide x86 unit shipments grew 8.3% to 7.6 million units.

HP outpaced the market in 4Q07, growing factory revenue 12.0% and gaining x86 market share in the process. HP led the market with 35.0% revenue share while IBM and Dell tied for second place with each vendor securing about 20% revenue share.

Bladed Server Market Shows Strong Shipment and Revenue Growth

Growth in the server blade market accelerated in the fourth quarter, with factory revenue gaining 54.2% year over year and shipments increasing by 35.6% compared to 4Q06. Overall, bladed servers, including x86, EPIC and RISC blades, accounted for $1.2 billion in the fourth quarter, representing 7.8% of quarterly server market revenue. More than 95% of all blade revenue is driven by x86 systems where blades now represent 14.8% of all x86 server revenue. For the full year 2007, worldwide blade server revenue grew 40.9% year over year to $3.9 billion.

HP maintained the number 1 spot in the server blade market in 4Q07 with 47.7% revenue share. IBM finished second with 32.5% revenue share.

“As the complexity and operational expenses of IT infrastructure continues to increase, a greater number of customers are turning to blade servers as a solution,” said Jed Scaramella, senior research analyst, Enterprise Server research at IDC. “The integrated nature of the blade platform enables customers to solve energy and space challenges, as well as a way to improve the flexibility of their infrastructure.”

Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, Fourth Quarter of 2007

(Revenues are in Millions)

Vendor 4Q07 Revenue 4Q07 Market Share 4Q06 Revenue 4Q06 Market Share 4Q07/4Q06 Revenue Growth

1. IBM $5,752 36.7% $5,724 37.5% 0.5%
2. Hewlett-Packard $4,337 27.7% $4,081 26.7% 6.3%
3. Dell $1,580 10.1% $1,480 9.7% 6.8%
3. Sun Microsystems $1,457 9.3% $1,493 9.8% -2.4%
5. Fujitsu/ Fujitsu Siemens $666 4.3% $ 622 4.1% 7.1%
Other $1,860 11.9% $1,875 12.3% -0.8%
All Vendors $15,653 100.0% $15,275 100.0% 2.5%

IDC’s Worldwide Quarterly Server Tracker, February 2008

Top 5 Corporate Family, Worldwide Server Systems Factory Revenue, Full Year 2007

(Revenues are in Millions)

Vendor 2007 Revenue 2007 Market Share 2006 Revenue 2006 Market Share 2007/2006 Revenue Growth

1. IBM $17,336 31.9% $17,154 32.7% 1.1%
2. Hewlett-Packard $15,415 28.3% $14,255 27.1% 8.1%
3. Dell $ 6,145 11.3% $5,467 10.4% 12.4%
3. Sun Microsystems $ 5,861 10.8% $5,749 10.9% 1.9%
5. Fujitsu/ Fujitsu Siemens $ 2,676 4.9% $2,691 5.1% -0.5%
Other $ 6,988 12.8% $7,209 13.7% -3.1%
All Vendors $54,421 100.0% $52,525 100.0% 3.6%

IDC’s Worldwide Quarterly Server Tracker, February 2008

IDC’s Server Taxonomy

IDC’s Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers, midrange enterprise servers and high-end enterprise servers. 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.


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