Worldwide server shipments and revenue showed strong growth in 2011 vs. 2010. That momentum, however, slowed considerably in the fourth quarter due to the shortage of hard drives caused by floods in Thailand, according to research firm Gartner.
Businesses worldwide purchased 9.5 million servers of all types in 2011, up 7 percent compared to the 8.9 million servers sold in 2010. That equated to a total 2011 server spend of $52.8 billion, up 7.9 percent over the $48.9 billion spent on servers the year before, Gartner said.
Those numbers reflected a strong drag on the total server market in the fourth quarter. About 2.5 million servers were sold during the quarter, up only 4.5 percent over the 2.3 million units sold in the fourth quarter of 2010. The revenue generated for those servers actually fell 5.4 percent to $13.9 billion, Gartner said.
The problem in the fourth quarter was a shortage of hard drives caused by massive floods in Thailand that destroyed up to one-third of the world's hard drive manufacturing.
The Thailand floods hit enterprise-class drives as well as desktop-class drives, causing price increases and shortages that impacted the server industry, said Jeffrey Hewitt, research vice president at Gartner.
"Conservatively, we can say there was an impact of roughly 10 percent to 15 percent on the server market," Hewitt said, adding that he expects a drag on the server market caused by hard drive constraints to continue into the second quarter of this year.
For all of 2011, Hewlett-Packard retained its position as the No. 1 server vendor in terms of units shipped, with sales of 2.8 million units for the year. That was a mere 0.2 percent increase over 2010 sales, the slowest growth rate of all server vendors.
HP, meanwhile, was the only server vendor to see a revenue drop for 2011, with sales down 0.1 percent over last year to $15.3 billion. That drop was enough for HP to lose its server revenue crown to IBM, whose sales rose 6.9 percent to $16.1 billion.
While HP's x86 server shipments rose 0.4 percent and revenue rose 3.9 percent to keep it in first place in x86 servers shipped, its overall performance was dragged down by its protracted fight with Oracle over Oracle's decision to stop developing software for HP's Itanium-based mission-critical server line. That resulted in an 11.4 percent drop in HP's Unix server shipments and a corresponding 16.4 percent drop in Unix server revenue.
IBM was the biggest winner in the HP-Oracle spat, with a 2.6 percent boost in Unix server shipments and a huge 23.9 percent increase in Unix server revenue. That, combined with a 1.0 percent rise in x86 server shipments and a 5.7 percent rise in x86 revenue, gave IBM a solid No. 1 spot for server revenue for the entire year at $16.1 billion, up 6.9 percent over last year.
Dell rode a solid 2.0 percent rise in server shipments to take the No. 2 spot for overall server shipments for the year. The company also managed to do a good job of raising average selling prices, with total server revenue growing 7.7 percent over 2010 to give it the No. 3 spot in server sales worldwide.
Cisco, which only entered the server market two years ago, did very well in 2011, Gartner said. Cisco was the sixth-largest server vendor in terms of shipments due to its blade server strength. The company's server sales topped $1 billion during the year to give it the No. 5 spot overall in revenue terms.
Cisco missed being in the top five in shipment terms because it only produces blade servers, a market that is growing fast but is still a minority of the overall server market, Hewitt said.
"Cisco has done an amazing job," he said. "You need to give it credit. It's grown from nothing to the top 10, and now it's at No. 6."
Part of the credit for Cisco's growth stems from the fact that its strong networking business makes it a part of almost every data center, Hewitt said. "You can argue that Cisco will naturally do well," he said. "But you can't minimize the idea that Cisco has made a tremendous push and a lot of growth. This is a strategic business for Cisco. And it will continue its focus here."
Cisco had a 1.5 percent share of the entire server market in terms of shipments during 2010 but a 1.8 percent share in the fourth quarter, Hewitt said. In the blade server market, Cisco accounted for an 8 percent share of the market, just slightly behind Dell. "It's on an accelerated growth path, and on the way to test its mettle in the market," he said.
Virtualization is having an ongoing impact on the server market, Hewitt said.
The market for virtual servers is already starting to mature. Hewitt said that customers who implemented virtual servers as a way to consolidate hardware have already pretty much wrapped up that part of the business and are now getting more value from them.
"Instead of replacing physical servers with virtual machines, we're seeing customers deploy new virtual machines to handle new workloads," he said. "Customers are still taking out physical servers thanks to virtualization, but it's because they need fewer physical servers to run their workloads. But it's also making them more efficient."