IDC Says Server Sales Plummet In First Quarter

The recession continued to take a big bite out of sales of giant computers known as servers during the first three months of the year, market tracker IDC reports.

Worldwide server revenue fell 24.5% during the quarter, which is the biggest annual percentage drop since IDC began tracking server sales in 1996. It was also the first calendar quarter since 1996 in which server revenue, at $9.9 billion, fell below the $10 billion mark. And it was the third consecutive quarter of revenue declines.

Sever sales were slow in every geographic area IDC tracks, with particular weakness in Europe.

The recession is mostly to blame, as businesses continue to throttle back spending on new servers. Unlike the last recession, however, server makers aren't drastically reducing prices but rather keeping them steady.

Hewlett-Packard Co. (HPQ) and Dell Inc. (DELL) were particularly hard hit, IDC says, with Dell's server revenue down by nearly a third, and H-P losing about a percentage point of market share. Meanwhile International Business Machines (IBM) performed better than its rivals.

H-P and IBM both ended the quarter with a leading 29.3% market share, with H-P's share falling slightly while IBM saw its share rise nominally. Sun Microsystems Inc. (JAVA) and Dell were in a tie for next in line.

The situation's not getting better. IDC analyst Matt Eastwood said to expect a repeat performance in the second calendar quarter, which IDC has yet to report.

However, he expects server sales to stabilize sometime in the second half of the year, with businesses expected to loosen up spending. Eastwood also sees growth returning to the server market in 2010.

-By Ben Charny, Dow Jones Newswires; 415-765-8230; [e-mail]