IDC: Server Market Revenues Decline in 2Q, Demand Remains Weak

in the second quarter of 2013. This was the second consecutive quarter of year-over-year revenue decline, as server market demand continued to soften in most geographic regions. Server unit shipments decreased -1.2% year over year in 2Q13 to 2.0 million units, the third consecutive quarter where year-over-year server shipments have declined.On a year-over-year basis, volume systems experienced a -2.4% revenue decline. At the same time, demand for midrange and high-end systems experienced year-over-year revenue declines of -22.3% and -9.5% respectively in 2Q13. All three segments were impacted by relatively difficult year-over-year compares combined with transitions in the technology refresh cycles.

"Mainstream SMB and enterprise server customers around the world continue to focus on consolidation, virtualization, and migration initiatives aimed at increasing efficiency and lowering datacenter infrastructure costs. At the same time, challenging economic conditions are dampening demand for new IT projects necessary to grow the server market globally," said Matt Eastwood, Group Vice President and General Manager, Enterprise Platforms at IDC. "It is clear that the competitive dynamics in the server market remain fierce as the leading server vendors work to offset weak demand for generally higher margin Unix and blade servers with lower margin rack and density optimized servers."

Overall Server Market Standings by Vendor:

· IBM held the number one position in the worldwide server market with 27.9% factory revenue share in 2Q13. IBM experienced a -10.0% year-over-year decline in factory revenue losing 1.2 points of share in the quarter on soft demand for System x and Power Systems.

· HP held the number two position in the market with 25.9% factory revenue share following a -17.5% year-over-year decline in factory revenue resulting in a loss of 3.6 points of factory revenue share. HP experienced disappointing demand for x86-based ProLiant servers coupled with continued declines in HP Integrity server demand in the quarter.

· Dell maintained third place with 18.8% factory revenue market share in 2Q13. Dell's factory revenue increased 10.3% compared to 2Q12, helping Dell to gain 2.8 points of factory revenue share. Dell now holds its highest-ever server market share in any quarter.

· Oracle maintained the number four position with 6.0% factory revenue share; Oracle's 2Q13 factory revenue decreased -5.7% compared to 2Q12.

· Cisco ended the quarter in the number five market position with 4.5% factory revenue share following 42.6% year-over-year revenue growth. With its highest ever market share, Cisco now holds sole possession of fifth place in the server market, breaking last quarter's statistical tie with Fujitsu.

Other Server Market Findings:
· IBM's System z mainframe running z/OS experienced its third consecutive quarter of growth, increasing revenue 9.9% year over year to $1.2 billion, representing 9.8% of all server revenue in 2Q13.

· Linux server demand continued to be positively impacted by cloud infrastructure deployments, as hardware revenue increased 1.5% year over year to $2.8 billion in 2Q13. Linux servers now represent 23.2% of all server revenue, up 1.8 points when compared with the second quarter of 2012.

· Microsoft Windows server demand was down -5.1% year over year in 2Q13 with quarterly server hardware revenue totaling $5.8 billion representing 49.3% of overall quarterly factory revenue, up 0.5 points over the prior year's second quarter.

· Unix servers experienced a revenue decline of -21.0% year over year to $1.8 billion, representing 15.1% of server revenue for the quarter. This was the lowest quarterly Unix server revenue ever reported by IDC.

"The non-x86 server market is in the middle of a major transformation, as hardware platforms associated with Unix continue to look for a bottom in their secular decline, mainframes find new 3rd platform workloads, and the market prepares for new RISC-based system-on-a-chip architectures to enter," said Kuba Stolarski, Research Manager, Enterprise Servers at IDC. "As the lines between x86 and non-x86 workloads continue to blur, customers will find compelling cases outside of x86 for hyperscale and scale-up solutions for their analytics, cloud, mobile, and social platforms."