Gartner Says 2010 Worldwide Server Market Returned to Growth with Shipments Up 17 Percent and Revenue 13 Per Cent
Server Market Ended the Year with Positive Fourth Quarter Shipments and Revenue Growth
"2010 was a year that saw pent-up x86-based server demand produce some significant growth on a worldwide level," said Jeffrey Hewitt, research vice president at Gartner. "The introduction of new processors from Intel and AMD towards the end of 2009 helped fuel a pretty significant replacement cycle of servers that had been maintained in place during the economic downturn in 2009."
"Ongoing blade server growth and the introduction of 'skinless' servers in the x86 segment also helped push 2010 results into double-digit growth rates, despite ongoing constraints in RISC/Itanium Unix platforms. The introduction of new mainframe platforms from IBM helped to drive increases in the mainframe segment with 68.3 per cent revenue growth of IBM's System Z platforms in the fourth quarter," Mr Hewitt said.
From a geographic perspective, all regions, with the exception of Japan, grew in revenue with the three highest growth rates shown by North America (24.5 per cent), Asia/Pacific (22.4 per cent) and Latin America (12.3 per cent). Europe, Middle East and Africa (EMEA) grew by 10.4 per cent and Japan declined by 4.4 per cent.
IBM led the worldwide server market, based on revenue in the fourth quarter of 2010 (see Table 1). The company ended the year with $5.2 billion in revenue for the fourth quarter of 2010 accounting for 35.5 per cent of worldwide server revenue. This was up 2.8 per cent, compared with the fourth quarter of 2009. IBM's growth was fuelled by its System Z and System X product lines.
Of the top five global vendors, IBM, HP and Dell delivered double-digit growth rates in terms of revenue, while Oracle and Fujitsu experienced revenue declines in the fourth quarter of 2010.
In server shipments, HP remained the worldwide leader for the fourth quarter of 2010 (see Table 2) with a year-on-year shipment increase of 6.9 per cent.
The results for the quarter were centred on x86 server demand, which increased in shipments by 7.1 per cent and revenue by 20.0 percent for the fourth quarter of 2010.
Full Year 2010 Server Market Results
2010 marked a return to growth with increases of 16.8 per cent in worldwide server shipments and 13.2 percent in revenue (see Tables 3 and 4). These results were fuelled primarily by a replacement of aging x86 servers, which had been maintained through the economic doldrums of 2009. Some cloud-related build-out is also likely to have fuelled increases, particularly in North America, while emerging regions, such as Asia/Pacific and Latin America, also added to the growth for the year.
Blade servers posted a revenue increase of 29.5 per cent and a shipment increase of 12.6 per cent for the year. HP was the 2010 leader in blade shipments with 47.3 per cent share, followed by IBM with 25.4 per cent share. These two vendors continued to dominate this form factor, although Dell also saw a modest share increase, and Cisco achieved a low, single-digit share in its first full year in the server market.
The outlook for 2011 suggests that growth will continue, but at lower levels, because the highest level of the replacement cycle for x86 servers was probably reached in 2010. These increases continue to be buffered by the use of x86 server virtualisation to consolidate physical machines as they are replaced.
HP and IBM are tussling for outright market leadership as both vendors achieved revenues of over $15 billion for 2010, both with a market share of 31 per cent. HP achieved a stronger year on year growth rate of 18.9 per cent to IBM's 9.2 per cent. HP has demonstrated strength with the results of its x86 ProLiant line all year, although IBM's System Z line was key in its improved results in the fourth quarter. 2011 will be a critical year in determining which of the relative strengths of these two leading vendors are best aligned to the market direction.
In Europe, the Middle East and Africa (EMEA), server shipments surpassed 706,000 units in the fourth quarter of 2010, an increase of 4.4 per cent from the same period last year (see Table 4). Server revenue totalled $4.3 billion in the fourth quarter of 2010, a growth of 10.4 per cent from the same quarter last year (see Table 3).
"The fourth quarter rounded off an encouraging year for the server market in EMEA with each quarter seeing positive year to year growth rates for both shipments and revenues," said Adrian O'Connell, research director at Gartner. "EMEA was particularly badly hit by the downturn in 2009 and, although economic concerns continue across much of the region, the server market has shown good momentum during 2010."
X86 systems have demonstrated consistently strong growth during the year but this was enhanced by IBM's System Z driving good high-end revenues in the fourth quarter as well. The only area of the market that remained weak is the UNIX segment. The UNIX segment saw revenue decline 18.7 per cent in the fourth quarter of 2010. UNIX vendors are squeezed between new investments in x86 platforms and the entrenched but strong installed base of System Z. "The challenge for UNIX vendors in 2011 is to limit migrations and to try to encourage new investment in these platforms," said Mr O'Connell.
Mr O'Connell added: "We also need to recognise that the market is still in a fairly tentative recovery mode. Many companies are still in cost-containment mode and, although 2010 growth levels were strong, we're still some way off the revenue highs that we saw in 2007."
In the fourth quarter of 2010, of the top five vendors, HP, Dell and Fujitsu exhibited growth above the average market in shipment terms. HP held the No. 1 position, with shipments growing at 8 per cent year-on-year. Dell, ranked No. 2, grew 5.4 per cent year-on-year. Fujitsu had the strongest growth with 20.5 per cent.
In the x86 market, total volume in EMEA grew 5.5 per cent in the fourth quarter of 2010. "The x86 market is becoming ever more critical to the overall server market," said Mr O'Connell. "X86 revenue increased 17.4 per cent in the fourth quarter and accounted for two thirds of total server revenue. Virtualisation, blades, 4 and 8 socket systems and richer configurations are all driving these strong revenue levels."
Overall, RISC and Itanium Unix revenues declined 19.3 per cent in the fourth quarter of 2010. IBM led the segment in the fourth quarter of 2010, albeit with a growth of 2.7 per cent. This resulted in a share increase to 38.3 per cent. Second-ranked HP declined 15.3 per cent and third-ranked Oracle declined 45.8 per cent. "These weak results are compounded by product transitions but are also indicative of the positioning difficulties that UNIX vendors are facing. The challenge remains for UNIX vendors to move upstream and fight for mainframe business, whilst also defending against Windows and Linux encroachments into their own installed bases," said Mr O'Connell.
Additional information is available to subscribers of Gartner Dataquest's Servers Quarterly Statistics Worldwide programme. This programme provides worldwide market size and share data by vendor revenue and unit shipments. Segments include: region, vendor, vendor brand, sub-brand, CPU type, CPU group, Max CPU, platform, price band, operating systems and distribution channels.
Gartner UK Ltd
Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the valuable partner to 60,000 clients in 11,000 distinct organizations. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,400 associates, including 1,200 research analysts and consultants, and clients in 85 countries. For more information, visit www.gartner.com.