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Tech Industry

Server sales continue to plummet

Worldwide sales of servers hit a record low of $9.8 billion for second quarter of 2009, according to IDC--which also sees hope for the weeks and months ahead.

Server sales around the world dropped to $9.8 billion for the second quarter of the year, a fall of 30.1 percent from the same quarter in 2008, according to an IDC report released Wednesday.

The latest downturn marks the fourth consecutive quarter of lower sales and the weakest quarterly server revenue since IDC first started tracking the market in 1996.

Quarterly server shipments also fell 30.4 percent from 2008's second quarter and 26.5 percent from the first quarter of 2009, according to IDC's Worldwide Quarterly Server Tracker. The global recession is still forcing enterprise customers to hold off on server purchases, IDC said.

All three classes of servers tracked by IDC were hit by weaker sales for the quarter. Revenue for high-end enterprise systems tumbled 32 percent from the second quarter of 2008. Sales of midrange enterprise machines dove 28.1 percent, while volume systems slumped 30 percent. This marks the third consecutive quarter that all three segments showed a sales drop.

"Over the past four quarters, the worldwide server market has experienced significant revenue deceleration in all geographic regions as the economic recession has deepened," said Matt Eastwood, group vice president of Enterprise Platforms at IDC. "Fewer servers have been shipped over the past four quarters than at any time since 2005 and it is clear that the worldwide server installed base is aging rapidly."

In terms of market share, IBM again hit the top of IDC's list with a 34.5 percent slice of the market on server sales of $3.4 billion. Hewlett-Packard came in second with a 28.5 percent market share based on revenue of $2.8 billion.

Uncertainty about its future may have led to poor results for Sun Microsystems. The company, which has sealed a deal to be acquired by Oracle, sold only $981 million worth of servers in the quarter, for a 10 percent cut of the market. Sun suffered the highest revenue decline on the list, with a drop of 37.2 percent from the year-ago quarter.

"Non-x86 servers did poorly for the quarter overall, and since Sun's business is largely exposed to that segment it suffered because of it," said IDC research analyst Daniel Harrington. "Without a doubt there were also negative effects on their business due to 'Sun Attack' programs launched by both IBM and HP in an effort to go after those uneasy customers. I think you are starting to see the first signs of that in these numbers."

With an economic recovery in sight, IDC is forecasting a brighter future as customers begin to test the waters with new server purchases.

"In the weeks and months ahead, IDC believes that IT customers around the globe will begin to focus on the future once again," said Eastwood, "making strategic computer platform decisions for the next business cycle, and driving more predictable server demand as market conditions stabilize in the second half of 2009."