Factory revenue in the worldwide server market decreased -4,4% year-over-year to $14,2-billion in the fourth quarter of 2013 (4Q13).
According to the International Data Corporation (IDC) Worldwide Quarterly Server Tracker, this was the fourth consecutive quarter of year-over-year revenue decline, as server market demand remained weak ahead of a forthcoming refresh cycle, which is expected to emerge in early 2014.
Worldwide server shipments increased 8,2% to 2,5-million units in 4Q13 when compared with the same year-ago period. For the full year 2013, worldwide server revenue decreased -4,4% to $49,7-billion when compared to 2012, while worldwide unit shipments increased 3,2% to 9-million units, a record high.
On a year-over-year basis, volume systems experienced 8% revenue growth to $10,2-billion in 4Q13. At the same time, demand for midrange and high-end systems experienced sharp year-over-year revenue declines of -19,6% and -28,5% to $1,2-billion and $2,8-billion, respectively, in 4Q13. The volume segment was aided by a continued expansion of x86-based hyperscale server infrastructures.
“While a record number of servers shipped in 4Q13, the market was constrained by weak demand for midrange and high-end systems. The market continues to be impacted by enterprise focus on 2nd platform workload consolidation, which at this point in time is only partially offset by 3rd Platform hyperscale server deployments around the globe,” says Matt Eastwood, group vice-president and GM: Enterprise Platforms at IDC.
“2nd Platform workloads continue to represent a healthy profit pool for server vendors targeting consolidation opportunities across the market. However, new profit pools in the 3rd Platform are emerging that create new market opportunities for OEMs and ODMs. IDC believes this market transformation requires increased focus from vendors in order to best capitalize on these diverging market trends.”
HP and IBM were statistically tied for the number one position in the worldwide server systems market. HP had 26,9% market share in factory revenue for 4Q13, as revenue increased 5,7% year over year to $3,8-billion.
HP experienced improvements in demand for its x86-based ProLiant servers, particularly in the U.S. IBM had 26,8% market share for the quarter as revenue decreased -28,5% year over year to $3,8-billion in 4Q13. IBM experienced significant year-over-year declines in quarterly revenue for all three families of systems – System x, POWER Systems, and System z mainframes.
Dell server revenue declined -2,4% year over year to $2,1-billion, maintaining third place with 14,5% factory revenue market share in 4Q13. Cisco and Oracle ended the quarter in a statistical tie for the number 4 market position with 4,5% and 4,1% factory revenue share, respectively
Linux server demand continued to be positively impacted by cloud infrastructure deployments, as hardware revenue increased 14,4% year over year to $4,1-billion in 4Q13. Linux servers now represent 28,5% of all server revenue, up 4,6 points when compared with the fourth quarter of 2012.
Microsoft Windows server hardware revenue increased 0,1% year over year in 4Q13 with quarterly server hardware revenue totalling $6,5-billion, representing 45,7% of overall quarterly factory revenue, up 2 points over the prior year’s quarter.
Unix servers experienced a revenue decline of -20,2% year over year to $1,9-billion representing 13,6% of quarterly server revenue for the quarter.
After four consecutive quarters of revenue growth, IBM’s System z mainframe running z/OS revenue declined -36,8% year over year to $1,1-billion, representing 8% of all server revenue in 4Q13.
“The Unix market continued its secular decline, and mainframes had large declines on a difficult compare to a year ago, amid explosive growth in hyperscale and ODM Direct sales,” says Kuba Stolarski, research manager: Servers at IDC.
“As the Unix server market continues to undergo consolidation and price compression, and as mainframes find their niche, IDC believes that the server market is very close to a tipping point, when hyperscale growth will be large enough to overshadow declines in the high-end.
“The additional growth in ODM Direct sales, spurred most recently by massive data centre expansion by some of the largest service providers, will help the server market reach that tipping point faster.”
Demand for x86 servers continued to improve in 4Q13, with revenues growing 7,8% in the quarter to $10,7-billion worldwide with unit shipments up 8,6% year over year to 2,5-million servers.
HP led the market with 32,2% revenue share based on 8,9% revenue growth while gaining 0,3 points of share when compared to 4Q12. Dell retained second place, securing 19,2% revenue share following a -2,4% year-over-year revenue decline while losing 2 points of share when compared with the fourth quarter of 2012.
IBM rounded out the top three x86 server positions, holding 12,7% revenue share following a -15,9% year-over-year factory revenue decline.
There are two types of modular form factors, each with a distinct use case. Blade servers, which are highly leveraged in enterprise consolidation and virtualisation, grew 2,8% year over year to $2,4-billion. Blades now account for 17% of total server revenue.
HP maintained the number one position in the blade server market in 4Q13 with 44% revenue share; Cisco and IBM held the second and third positions in the blade market with 20,5% and 19,5% revenue share, respectively.
Density optimized servers, utilized by large homogeneous hyperscale data centres, also experienced solid demand in 4Q13. Revenue grew 70,3% year over year in 4Q13 to $1,2-billion as unit shipments increased 64,6% to just over 382 000 servers.
Density optimized servers now represent 8,5% of all server revenue and 15,4% of all server shipments. HP maintained the number 1 position in the density optimized segment and Dell held the number 2 position in 4Q13 with 34,9% and 19,7% revenue share, respectively.
“Blades and density optimized servers account for a quarter of server market revenue, up from one fifth a year ago,” says Stolarski. “That is further evidence that the shift towards public cloud hyperscale deployments on one hand, and private clouds on integrated systems on the other, is real and significant. Since a large portion of hyperscale is still deployed on rack-mounted servers, the potential for modular design growth in the near future is substantial.”