Gartner Calls Q1 'Worst-Ever' Server Decline

The U.S. market in the quarter recorded unit shipments falling 27 percent and revenue falling 21.2 percent compared with the first quarter of 2008, said Jeffrey Hewitt, research vice president at Gartner.

Last year's oil shock and tightening credit put a big damper on the U.S. server market, Hewitt said.

"They not only impacted buyers and their ability to buy the products, but also the ability of channel partners to handle inventories and sales," he said.

The U.S. market was also hit by a wave of consolidation, thanks to the increased use of server virtualization to help eliminate underutilized servers, Hewitt said.

Just as important was the timing of the release of new server products in late March based on Intel's Nehalem Xeon 5500 processor, Hewitt said.

"If you are a buyer of new server technology and your budget is constrained, you might think, 'Why spend my limited budget on older tech?' " he said. "We're still studying this. It's anecdotal. But we feel customers are looking at the coming products and waiting. I've asked customers, and they said it's happening. But we haven't done a random sample survey."

The tough economy, consolidation and poor timing resulted in a big hit to server sales, Hewitt said. "[They] created the perfect storm for the worst downturn in years," he said.

The plunge in worldwide server sales and shipments spared none of the major vendors, Gartner said.

HP retained its lead in total server shipments by selling nearly 531,000 servers in the first quarter, which was down 22.3 percent compared with the same period last year. Dell was second, shipping more than 382,000 servers, down 26 percent.

They were followed by IBM, with shipments down 23.5 percent to about 231,000 units; Sun Microsystems, down 28.5 percent to about 60,000 units; and Fujitsu/Fujitsu Siemens, down 25.2 percent to about 59,000 units.

For server revenue, the Top 5 list of vendors looked the same, except that IBM held on to its first-place ranking with revenue of $3.1 billion, down 20.4 percent compared with the first quarter of 2008.

It was followed by HP, down 25.8 percent with revenue of $2.9 billion; Dell, down 24.7 percent to $1.2 billion; Sun, down 26.0 percent to $976 million; and Fujitsu/Fujitsu Siemens, down 18.3 percent to $599 million.

The total number of x86-based servers shipped in the first quarter of 2009 dropped 23.9 percent to 1.6 million units, with total revenue for the market segment falling 27.1 percent to $5.4 billion, Gartner said.

HP remained the undisputed leader of the x86 server market in the first quarter, according to Gartner. The company shipped more than 518,000 servers worth nearly $1.9 billion, far outdistancing its closest rival, Dell, which shipped more than 382,000 servers worth about $1.2 billion during the quarter.

The number of Unix servers shipped in the first quarter dropped even further than x86 servers, falling 31.3 percent compared with the same period last year, Gartner said. However, the average selling price of Unix servers rose, causing total Unix server revenue to drop 20.4 percent.

Sun retained its lead in the Unix server market in terms of volume by shipping more than 32,000 units compared with about 20,000 units for IBM and about 9,500 units for HP.

However, Sun's Unix server revenue of about $822 million was good enough only for third place, after IBM with $1.1 billion and HP with $831 billion.