Gartner: 2Q Server Prices Show Strength On Virtualization, Mainframe Trends

IT customers worldwide purchased 8 percent more servers in the second quarter of 2011 than they did in the second quarter of 2010, according to the latest server sales estimates by analyst firm Gartner.

And with the rise in average selling price as servers become more powerful to handle virtualized and other workloads, IT customers spent 19.5 percent more in the second quarter than they did last year to purchase those servers.

Gartner estimated that worldwide server revenue in the second quarter hit $13.2 billion, up 19.5 percent from the $11.1 billion it estimated for the same period last year.

The overall Gartner estimates for the second quarter worldwide server were the same as estimated from rival analyst firm IDC, which were released on Wednesday.

Gartner also estimated that worldwide server shipments for the quarter reached 2.3 million units, up 8 percent over the 2.2 million units shipped last year.

The significantly higher growth rate for server revenue vs. server shipments shows an increasing average selling price per server across the entire market, said Jeffrey Hewitt, research vice president at Gartner.

The rise in server average selling price is seen from mainframes to x86 servers as customers look for richer configurations for virtualization, Hewitt said.

"If you are using virtualization as a mechanism for consolidation, you want to make sure servers are robust enough," he said. "So the market puts more memory and other peripherals in the servers."

While increasing virtualization is driving up average selling prices even as server shipments grow, cloud computing is having relatively little impact on the overall market even as it is starting to drive a huge shift in the way servers are purchased, Hewett said.

The rapid increase in the number of devices which users use to access the Internet, along with the growth in Internet access points, is shifting server shipments away from corporate data centers and towards cloud data centers, he said.

"I've heard it said that you could have a data center for every application or type of smart device," he said. "These data centers are driving server sales. Many companies are finding they can use the cloud to run more applications. So the market is borrowing from Peter to pay Paul, and shifting servers from corporate data centers to cloud data centers."

Blade servers also did well, with shipments up 8.2 percent and total revenue up 29.5 percent over last year. Hewitt said that the fact that blade server shipments rose about the same as overall server shipments shows that this part of the market is starting to mature.

"Blades tend to be more expensive, and tend to lock customers in when compared to rack-optimized servers," he said. "This part of the business is more mature compared to even two years ago."

The quarter was especially good for IBM, which saw its total revenue grow 23.9 percent over last year, taking it to $3.8 billion, or just shy of overall server revenue leader Hewlett-Packard, which saw its revenue rise by 11.4 percent to $3.9 billion.

A major part of IBM's revenue growth came from a very strong push in RISC/Unix server sales, where IBM's sales grew 27 percent over last year to reach $1.3 billion. That gave IBM a solid 47.8 percent share of that market, well ahead of Oracle, whose sales slipped 10.2 percent to $671 million. In third place for RISC/Unix server sales was HP, which saw its revenue plummet 15.5 percent to $582 million.

Next: Shifts In Server Vendor Shares

IBM's RISC/Unix server business rose at the expense of those of HP and Oracle in part due to the impact of the ongoing dispute between the two over Oracle's decision to stop supporting HP servers in future releases of Oracle software, Hewitt said.

However, more important to IBM's success in this market is the fact that IBM is at its best when grabbing market share in a market which is flat or declining, he said.

"IBM executes well, and it takes market share from others," he said. "IBM is the ultimate pit fighter. Others will shine in growing markets. But when it comes to pit fighting in declining markets, IBM does it better than anyone."

In the x86 market, HP enjoyed a strong 11.9 percent revenue increase and a 17.7 percent increase in shipments to solidify its status as the number one vendor in this part of the server business, Gartner estimated.

Coming in at number two was Dell, which saw its server shipments increase 4.4 percent even as its server revenue fell 5.8 percent, Gartner said.

IBM was number three, and Fujitsu number four, in the x86 server market, with both companies showing strong improvements in server revenue compared to the growth in units shipped.

Oracle actually had a strong second quarter in the x86 server market, with revenue rising 46.3 percent over last year to make it the fifth-largest x86 server sell in terms of revenue. However, Lenovo burst into the top five in terms of the number of x86 servers shipped, with an increase of 45.8 percent over last year, Gartner said.