Server sales did very well in the first quarter of 2011, but the news for Oracle and Cisco great as the two enjoyed exceptional performance for the quarter, according to a new report by IDC.
Oracle, which has been beset by a declining server business thanks to uncertainty over its acquisition of Sun Microsystems, roared back in the quarter with the second-fastest growth of the top five vendors.
And Cisco, which only entered the server market two years ago with its Unified Computing System, broke into the top five servers in North America for the first time by grabbing blade server market share from its competitors.
However, the growth of Oracle's and Cisco's server sales were less significant when considering that the growth was based on low sales in the past, IDC said.
IDC on Tuesday reported that worldwide server sales reached $11.9 billion in the first quarter of 2011, up a solid 12.1 percent over the $10.6 billion in sales estimated for the first quarter of 2010.
Hewlett-Packard retained its title as the world's largest server vendor in revenue terms. The company sold an estimated $3.8 billion worth of servers in the first quarter, up 10.8 percent over sales in the same quarter of 2010.
IBM was second, with $3.5 billion in server sales, up a whopping 22.1 percent over last year. They were followed by Dell at $1.9 billion, up 9.7 percent; Oracle at $773 million, up 13.6 percent, and Fujitsu at $578 million, down 15.6 percent, IDC said.
For the North American market, IBM was the leading server business with a 29.4 percent share of the market, followed by HP at 27.7 percent, Dell at 23.3 percent, Oracle at 7.5 percent, and Cisco at 3.0 percent, IDC said.
Oracle's server sales have been steadily slipping since the company got into the hardware business with its acquisition last year of Sun Microsystems.
That decline stemmed from the uncertainty of Oracle's server strategy following the acquisition, said Jed Scaramella, research manager for enterprise servers at IDC. "The other manufacturers took advantage of the situation, especially IBM," Scaramella said.
Because Oracle's servers sales had been falling, the growth in sales in the first quarter was based on a relatively easy comparison with last year, Scaramella said. "But it's a good story," he said. "They're climbing back as their strategy gets better articulated."
Cisco's move into the top five vendors in the North America market results from its strong presence in the blade server market, Scaramella said.
IDC estimated blade server revenue grew by 23.8 percent and shipments grew by 5.4 percent over last year, with revenue hitting $1.8 billion, or about 15.2 percent of all server revenue, IDC sais.
HP had a 50.0 percent share of the blade server market, followed by IBM at 20.2 percent, Cisco at 9.4 percent, and Dell at 8.4 percent. This is a big shift from the first quarter of 2010, with HP's market share slipping about 4 points and IBM's share slipping about 3 percent, Scaramella said. "Cisco grabbed market share from everybody," he said.
Between 60 percent and 70 percent of Cisco's sales came from the North American market, Scaramella said.
Cisco came into the market with a clean strategy of targeting highly-virtualized environments while being less concerned with the overall server market, Scaramella said.
"Cisco's strategy is sound," he said. "When we talk to Cisco UCS customers, they say UCS works. Cisco has a big networking business, and that's where the vendor went first with its servers."
Next: x86 Servers Did Well, Non-x86 Servers Did Very Well
The x86-based server market did well, with first quarter 2011 revenue jumping 12.0 percent while shipments increased 2.6 percent to 1.9 million units, IDC said. They accounted for 66.3 percent of the total worldwide market in revenue terms.
However, Unix and mainframe sales increased even faster, by 12.3 percent over last year, making it the first time that non-x86 server sales grew faster than x86-based server sales for some time, Scaramella said.
IBM mainframes did especially well, with first quarter 2011 sales up 41.1 percent over the same period of last year. "IBM had a huge Q4 and Q1, thanks to a refresh of its mainframe line in late 2010," he said.
Many people have been calling for the demise of Unix and mainframe servers, Scaramella said. "But for mission-critical workloads, customers are still relying on them," he said. "These systems are very sticky with customers."
The growing importance of virtualization is causing the average selling price of servers to continue to rise, Scaramella said.
"Customers are buying more richly-configured systems with higher processor bins, more memory, and more I/O," he said. "Customers not only need to think about the server, but also about how they connect to storage and I/O. For the x86 server market, virtualization is a boon because customers are buying more server capacity at the x86 level."