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Worldwide server market hit by slow demand

First-quarter factory revenues see 7.7% YOY decline, according to IDC tracker figures

Worldwide server market hit by slow demand
Server revenues took a hit after consolidation continued to be a strategic focus for many large and small customers around the globe.

Factory revenue in the worldwide server market decreased 7.7%, year on year, to $10.9bn in the first quarter of 2013, according to the International Data Corporation (IDC) Worldwide Quarterly Server Tracker.

The decline is the fifth such year-on-year drop in the previous six quarters. Server unit shipments decreased 3.9%, year on year, in 2013Q1 to 1.9m units as consolidation continued to be a strategic focus for many large and small customers around the globe.

On a year-on-year basis, volume systems experienced a 3.1% revenue decline. This was only the third time in the previous fourteen quarters that volume system demand declined year on year, according to IDC.

At the same time, demand for midrange and high-end systems experienced year-on-year revenue declines of 18.3% and 17.1% respectively in Q1. The midrange and high-end markets were impacted by difficult year-on-year compares combined with transitions in the technology refresh cycles typical for these segments.

"Customer demand for new servers is being impacted by ongoing server consolidation, technology transitions, and challenging macroeconomic conditions across the globe," said Matt Eastwood, group vice president and general manager, Enterprise Platforms, IDC.

"In fact, every geographic region except Asia-Pacific experienced revenue contraction in the quarter. It is clear that challenging market conditions are increasing the competitive dynamics for server market share globally, particularly since compute represents a critical element of larger IT transformations that continue to reshape broader enterprise IT market opportunities."

HP held the number-one position in the worldwide server market with 26.9% factory revenue share for Q1. HP's 14.8% revenue decline included weak demand for x86-based ProLiant servers, which were challenged by competitive pricing pressure, and continued weakness in Itanium-based Integrity server revenue.

IBM held the number 2 spot with 25.5% share for the quarter as factory revenue decreased 13.4% compared to 2012Q1. Demand for IBM's Power Systems and x86-based System x servers declined, year on year, while demand for System z improved solidly in the quarter due to the combined effects of a weak year-on-year compare and the continuation of a refresh cycle.

Dell maintained the third position with 18.5% factory revenue market share in Q1 as factory revenue increased 10.1% compared to the same period a year earlier. Dell gained 3 points of worldwide server market share in the quarter, helped in part by strong demand from its density-optimised data centre solutions business. Fujitsu, Oracle, and Cisco ended the quarter in a three-way statistical tie (less than 1% difference in revenue shares) for the number-four position with 5.1%, 4.8%, and 4.1% factory revenue share respectively.

Fujitsu's Q1 factory revenue decreased 8.5% compared to the same quarter in 2012 and Oracle experienced a 26.2% year-on-year decline in factory revenue in Q1. Cisco's factory revenue was up 34.9%, year on year in the first quarter.

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