More stormy weather for server sales

The second quarter is shaping up to be another tough one for the server market, says a new report, but clearer skies may be in sight.

John G. Spooner Staff Writer, CNET News.com
John Spooner
covers the PC market, chips and automotive technology.
John G. Spooner
2 min read
The second quarter is shaping up to be another tough one for the server market, but relief may be in sight.

That's the view of research firm IDC, which on Friday lowered its quarterly forecast for worldwide unit sales of servers.

IDC said unit sales will decline 14.5 percent from last year's second quarter, citing a slower-than-expected recovery in sales to large corporations. The server market declined almost 21 percent year over year in the first quarter. Servers are the powerful computers used to store files and conduct transactions on computer networks.

The decline is expected to be a short-term trend, however, with unit sales growth returning in the third and fourth quarters of the year, IDC said. That growth is expected to carry over into 2003.

For the year, IDC said worldwide server sales will decline by 5 percent from 2001.

"After almost two years of battling tough economic conditions and capital spending freezes, the server market is well positioned to regain momentum in 2003 and beyond," Vernon Turner, IDC's group vice president of global enterprise servers, said in a statement.

One area of growth is expected to be in so-called blade servers, which could eventually account for as much as 20 percent of overall unit sales by 2006, IDC said. Blade servers are essentially small servers built on cards that can be plugged into a special rack, where they are stacked like plates.

Elsewhere on the server front, IDC expects shipments of mainframe computers to decline from about 13 percent of the market now to about 8 percent in 2006, as companies move to smaller Unix- and Windows-based machines, particularly in Japan.

Overall, after recovering from the economic flu of 2001 and 2002, the server market should begin to achieve a compound annual growth rate of 3.8 percent over the next few years, with $66.9 billion in potential sales by 2006, IDC said.