IDC: Server Sales Decline May Push Dell Toward Acquisition


The research firm on Wednesday released its newest IDC Worldwide Quarterly Server Forecast in which it estimated worldwide server sales to reach $44.5 billion, down 22.1 percent compared with $57.1 billion in 2008.

Total server spending is expected to contract a further 0.4 percent to $44.3 billion in 2010 before rising 2.9 percent to $45.6 billion in 2011. Server spending will then grow to $47.1 billion in 2012 and $48.5 billion in 2013, IDC estimated.

The sales estimates point to stabilization over the next couple of years, with sales slowly recovering afterward, said Matt Eastwood, group vice president of enterprise platforms at IDC.

This is not the first time the server market has fallen from a peak that it never reached again. "We saw this previously during the dot-com days when the server market peaked at $70 billion in 2000, and then declined by 30 percent in 2001 and 2002," Eastwood said.

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The overall IT market will continue to grow faster than the server market as customers look for better utilization of their existing hardware, Eastwood said.

"Vendors will grow the software and services offerings they wrap around their hardware," he said. "That's where they see market growth."

Such a shift in the server business could mean that hardware-focused vendors like Dell will need to make some acquisitions, Eastwood said.

"There's lots of speculation about Dell and what it will do," he said. "Overall, this down market is a good time to beef up product lines with acquisitions because acquisition prices are low. But except for Oracle's acquisition of Sun Microsystems, we haven't seen a lot of activity."

Dell has a couple of options for beefing up its server business, Eastwood said.

One would be to buy Unisys, a high-end server maker that also has a services arrangement with Dell and is already a good Dell partner, he said.

Dell could also buy a company like Acer, which would not only give it a wider server line but also one of the world's top-selling notebook PC brands, Eastwood said.

"Acer would be less of a strategic move, and more of a move to gain market share," he said. "It could take out a major competitor, and diversify itself outside the U.S."

Dell has recently shown interest in designing products specifically for the enterprise data center, and so might see interest in companies such as Rackable, Appro International or Verari Systems, he said.