IDC Numbers In: IBM and Blades Likely to Lead out of Recession

Rob Enderle

IDC's server numbers were recently released, and while HP remains dominant in several key areas, IBM actually came out on top overall -- largely, I think, because of its early and aggressive moves to take share from Sun as it struggled with being acquired. Linux is actually falling off against Windows, which is kind of amazing given the economic conditions, and blades appear to be the segment with the greatest strength. The market has a feel, I think, of being on the cusp of recovery and it looks like IBM as a company and blades as a segment may lead the way out.


This is interesting because HP is actually the market leader in blades.


Server Market


As I mentioned earlier, IBM positioned aggressively as the alternative to a failing Sun when Oracle won the business from them. The IDC numbers just in showcase that its gambit trumped all others, gaining nearly 2 points of share to lead the market for servers with a dominant 34 percent, followed by HP with 28.5 percent and Dell at 12.4 percent. Sun, once the company to beat in this segment, was down to 10 percent share and expected to fall even further once IT starts buying again. Year-over-year, the market was down a crippling 30 percent, showcasing just how sick the market is at the moment.


In the UNIX market, down 31 percent and historically Sun's strongest, IBM picked up a whopping 7.4 percent of share to reach a near-dominant 41 percent. With continued Sun competitive migrations, IBM has 50 percent share in sight and, against a weakening Sun, 50 percent or better market share is achievable. Sun fell 4 points to 27 percent share and this decline should continue to accelerate as the uncertainty surrounding Sun's future continues.


Low-cost x86 servers really took it on the chin, with a 30.9 percent drop in revenue; IBM showed growth but still falls into third place with 1.4 percent gain to 17.5 percent. HP continues to lead this segment with an impressive 36.9 percent share (keeping PCs really helped here), followed by Dell at 23.7 percent share. You would think during these hard times revenues would be shifting to lower-cost x86 products, but that doesn't seem to be the case. Apparently buyers are finding equivalent value through scale in the higher-end products. It is also interesting that of the top three, only IBM is reported as gaining significant share in that it is the only one without a PC business.


Comparatively, blades were a massive hit, declining only 12.1 percent year over year and possibly reflecting an increasing market view that this path may be in IT's future. Shipments declined 19.1 percent, indicating that the value of each sale increased, suggesting that buyers were shifting to more expensive, more highly capable blades as well. Once again, IBM showcased the greatest growth, gaining nearly 4 points. However, HP remains dominant with nearly 53 percent -- more than Dell and IBM combined, as Dell has only 9.1 percent share of this segment.

Linux vs. Windows


This wasn't a great year for either platform, but Linux revenue declined 28.9 percent with 12.8 percent share, while Windows declined 27.7 percent and represents the biggest portion of the market now (based on revenue) at 38.1 percent. For those Linux folks looking at when Linux will bypass Windows, at this rate it never happens. This is interesting in that you would think in particularly hard times the perceived cheaper Linux would gain share. Evidently, that isn't the case this cycle.


UNIX, as you would expect, is down sharply, losing 30.9 percent and dropping solidly below Windows Server at 31.5 percent of the market. Windows is within shooting distance of generating the combined revenue share of UNIX and Linux (44.3 percent vs. 38.1 percent -- it's within 6 points now).

Wrapping Up: Looking to Recovery


IBM continues to show benefits from focusing on the Sun opportunity and, based on IDC's numbers, is the only vendor showing strong-to-moderate growth as a result. On revenue, largely thanks to its dominant high-end position, IBM continues to lead the server market, while HP has a dominant position in the strongest segment, blades, which is both falling the least and increasing in per unit revenue. Sun is looking less and less relevant and the soon-to-be-combined company desperately needs to put the merger behind it and focus on the future. It continues to look like HP is the most likely buyer for the Sun hardware portion of the company, but with the value of that property dropping sharply and the low likelihood that HP will want to retain many of the existing Sun staff, slowing the decline in the interim will likely be near impossible.


In any case, the segment to be in, based on this report, is blades, and the company showing the strongest growth is IBM. This makes it likely, if recovery is close, that IBM as a company and blades as a segment will recover first.

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