2006 A Good Year For Servers

Worldwide server shipments in 2006 totaled 8.2 million, up 8.9 percent from 7.6 million in 2005, Gartner said. The leading vendor overall was Hewlett-Packard, which sold nearly 2.3 million servers in 2006, up 8 percent over last year and representing a 27.5 percent share of the world market. Following HP in global shipments was Dell at 1.8 million units, up 4.9 percent year over year, and a 21.7 percent market share,

Rounding out the field in worldwide server shipments were IBM at 1.3 million units, Sun Microsystems at 369,000 units and Fujitsu/Fujitsu Siemens at 257,000 units.

Total server revenue for 2006 was $52.7 billion, up 2 percent over $51.6 billion in 2005. IBM led with $16.9 billion in server sales, up 1.7 percent over 2005. They were followed by HP at $14.2 billion (-2.3 percent), Sun at $5.8 billion (+15.4 percent), Dell at $5.4 billion (+0.4 percent) and Fujitsu/Fujitsu Siemens at $2.5 billion (-7 percent).

X86-based server sales were by far the biggest part of the server business, with about 7.7 million x86-based servers shipped in 2006, up 9.9 percent over 2005. HP was the x86 segment's leader, followed by Dell and IBM.

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Growth of server shipments in 2006 would have been higher except that sales in the fourth quarter were dragged down by customers waiting for new multicore models, said Jeffrey Hewitt, research vice president at Gartner.

The fastest-growing vendors in the x86-based server segment were Rackable Systems and Sun, Hewitt said. Server shipments from Rackable, Milpitas, Calif., grew 68 percent over 2005, and revenue was up about 60 percent. Sun saw its x86 server shipments grow by about 48 percent and its revenue jump 60 percent, meaning average selling prices actually rose.

Sun's growth was significant for the company, Hewitt noted. "At the very least, it shows their customers are buying servers again," he said. "The question is, can they turn this into new customers?"

That's also the question for another segment of the server market: mainframes. Gartner reported that mainframe shipments last year grew 3.9 percent over 2005, thanks to IBM's introduction of new System Z servers.

Still, Hewitt said, that growth is coming from IBM's current customer base. "They may be getting a new customer here and there, but not a lot," he said.

Blade servers are growing strong and taking a bigger part of the server market, Hewitt said. Blade server shipments grew 33 percent and revenue 36.5 percent vs. 2005 totals. For the year, blade servers accounted for about 9.1 percent of shipments, he said.

IBM shipped about 41.1 percent of all blade servers in 2006, followed by HP at 32.5 percent. "You'd think Dell will be able to gain in this space," Hewitt said. "But they need to get all their issues behind them first. For now, IBM and HP dominate."

Server virtualization has yet to impact server shipments, but it will happen, according to Hewitt.

"In 2007 to 2009, virtualization will have its peak impact," he said. "It won't necessarily cause a decline in shipments, but it will have an impact. There are just so many new file types, new applications and new devices on the Web. Who would have thought people would be watching 'Friends' on their cell phones? These all require new server power."

However, server virtualization could get a huge boost at the expense of physical server sales, Hewitt said. "If we see a pandemic or some other disaster, customers would have to move to virtualization," he said. "That could create a couple years of decline in shipments."