Tech Industry

Server sales drop 25 percent worldwide

Sales plummeted in the first quarter, marking the third consecutive quarter of declines and the lowest quarterly sales figure in at least a dozen years, IDC says.

Worldwide server sales suffered a 25 percent drop in the first quarter, hitting their lowest level in at least 12 years, according to a new report from market tracker IDC.

The report, released Thursday, recorded first-quarter factory server sales at $9.9 billion, a drop of exactly 24.5 percent over the same period a year ago--and the lowest level since IDC began covering the market a dozen years ago.

The number of servers shipped fell 26.5 percent from the year-ago quarter, the smallest quarterly figure in the last five years.

IDC breaks the server market into three segments--volume servers (priced under $25,000), midrange ($25,000 to $499,999), and high-end enterprise ($500,000 or more). For the first time since 2002, all three segments saw lower revenue.

The low end of the market suffered the most, with quarterly sales sinking 30.5 percent year over year. Revenue in the midrange market slipped 13.6 percent, while high-end sales fell 19.5 percent.

"Market conditions worsened in all geographic regions during the first quarter as customers of all types pulled back on both new strategic IT projects and ongoing infrastructure refresh initiatives," Matt Eastwood, group vice president of Enterprise Platforms at IDC, said in a statement.

Among the top five server vendors profiled, Dell was hit hardest, with quarterly server revenue tumbling 31.2 percent. Hewlett-Packard showed a 26.2 percent decline. Sun Microsystems watched its revenue dive 25.5 percent. IBM saw its sales drop 19.9 percent. Sales at Fujitsu/Fujitsu-Siemens fell 18.8 percent.

IBM and HP are the top server vendors, with each owning 29.3 percent of the server market.

On an optimistic note, Eastwood did predict a slight turnaround later this year.

"Most enterprise organizations are deferring new IT procurements and instead focusing on extending server lifecycles and improving existing asset utilization," he said. "IDC believes that while these strategies are effective in the near term, server demand will begin to improve in the second half of the year as customers begin to rebuild their IT capabilities in advance of a meaningful economic recovery in 2010."