Tight budgets favor low-end servers

Server shipments grew in Q3 but server revenue declined as companies opted to buy lower priced systems

Server shipments grew in the third quarter this year, though server revenue declined as companies lowered spending to meet budgetary constraints, according to a study released by Gartner on Monday.

Purchase of more expensive systems, like Unix servers, were put on hold as buyers tried to keep spending in check during the quarter, said Jeffrey Hewitt, research vice president at Gartner.

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Buyers instead opted to buy lower priced x86 systems, which saw a growth in shipments during the third quarter. However, vendors saw revenues on x86 systems drop on lower average selling prices, Hewitt said.

Server markers shipped more lower priced x86 servers with two and four processor sockets, which led to more aggressive pricing on servers, Hewitt said.

Coupled with lower-end server purchases, companies are also investing in new server technologies like virtualization, where server workloads are consolidated into virtual environments, Hewitt said. That helped reduce spending on server technologies as companies try to meet budgetary constraints.

Blade servers with x86-based chips also witnessed healthy growth during the quarter, Hewitt said. Companies are taking advantage of the flexibility provided by blade servers to work in different environments, from performing basic applications to being scalable enough to handle heavier workloads in data centers, he said.

Total server shipments in the third quarter this year were 2.3 million units, a 4.4 percent increase compared to the third quarter of 2007. Hewlett-Packard was the world's top server vendor, shipping 724,024 units, a 11.4 percent increase over last year, giving the company a 31.2 percent market share. Dell was second, shipping 500,470 units, a 3.3 percent increase. IBM was third, shipping 308,524 units, a 3.5 drop compared to last year.

HP was the top x86 server vendor, shipping 708,977 units, taking 31.9 percent of the market and growing 12.3 percent year-over-year. Dell was second, shipping 500,470 units, followed by IBM, which saw shipments drop by 1.8 percent to 278,721 units.

Worldwide server revenue dropped by 5.4 percent to $12.7 billion compared to last year's third quarter. All major server vendors, including IBM, Hewlett-Packard and Dell saw server revenues drop during the quarter, with top Unix server vendor Sun Microsystems recording the highest drop of 13.7 percent.

Unix shipments totaled 86,646 units during the third quarter, a 16.1 percent year-over-year decline.

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