Server Market Declines 5% In Q1 2013

Server Highlights

• In Q1 2013 server revenues dropped 5% to $13.6b, unit shipments fell 1% to 3.5m
• The total installed base grew 7% to 46.7m
• x86-based systems were $10.2b (-3%), with 3.5m shipments (-1%) and an installed base of 45.6m (+7%)
• Virtualised servers accounted for 47% of revenue and 37% of units in the quarter
• In the year to the end of March HP was market leader with a 22.9% share, followed by IBM (19.2%) and Dell (14.%)

The server market needs to be studied closely as it ebbs and flows as a result of the weak economic conditions in major markets. The decline in Q1 follows the 7.5% growth we reported in Q4 2012. You’ll want to learn more about what happened in the latest quarter.

Dell Is Catching IBM And HP

The server market has been a 2 horse race between HP and IBM for many years, with Sun (now part of Oracle) vying for 1^st position in the late 1990s. In the last couple of years Dell has been growing its business impressively and is beginning to challenge IBM for the number 2 position. If (and many think just ‘when’) IBM offloads its x86 ‘pizza box’ business to Lenovo, Dell may overtake it.
In the year to the end of March HP led with a 22.9% share ($13.1 Billion), followed by IBM (19.2%) and Dell (14.5%). In total the market was worth $57.3 Billion. Shipments stood at 14.1 Million (down 1%), while the total installed base of servers grew 7% to 45.6 Million.

Vmware Continues To Lead In Server Virtualisation

52.9% of the value of all servers sold in Q1 were physical-only boxes: of the $6.4 Billion virtual servers sold VMware’s hypervisors accounted for 36.1%, Hyper-V 7.1%, KVM 6.3% and Xen (including Citrix XenDesktop) 6.1%, while Others (including IBM, Oracle and HP mainframe and Unix machines) held 44.3% of spending. VMware held a 64.1% share of virtualised x86 server space. Assuming an average of 3 virtual machines per server, virtual server shipments (3.9 Million) significantly exceeded physical-only machines (2.2 Million).

Some Conclusions

The tightness of the economy makes the server market extremely competitive, since vendors can only really succeed by winning accounts from others. We see the development of Converged Infrastructure and Integrated Systems as a way of maximising revenues by including more in each deal.
In terms of innovation we’ve covered some major server launches already this year –microservers from HP, AMD’s SeaMicro and others and (most recently) Dell’s VRTX. New systems – especially integrated ones – should allow vendors chances of success, although we forecast a slight decline in sales for the whole of 2013.