IDC has released its Worldwide Quarterly Server Tracker for the second quarter of 2008 and the results mirror that of last week's figures from Gartner, in that to gain sales, vendors are dropping the price significantly.
Factory revenue in the worldwide server market grew 6.4 percent year over year to $13.9 billion in the second quarter of 2008, while unit server shipments grew 11.1 percent year over year.
While the collective numbers are up, some segments are down because of intense price competition, so much so that companies are actually down in revenues year over year. For example, for the year, IBM (NYSE: IBM) enjoyed a nice 13.8 percent jump in revenue, but dollar sales in its x86 business actually fell 4.8 percent, while unit sales were up 6.1 percent.
IBM's stellar quarter came from the high-end picking up for slack on the low end. His came after IBM merged its System i and System p lines earlier this year and thanks to pent up demand for mainframes and the release of the z10 server.
"We saw a real competitive pricing environment out there, and it looked like people are pushing stuff out the door," Jed Scaramella, senior research analyst for Enterprise Platforms at IDC, told InternetNews.com.
"There are a couple of things behind that, we suspect it's mostly to get their footprint in the business to get pull through revenue like services. But [this] makes us concerned for Q3. We saw some steep declines for pricing, especially in the U.S.," he added. U.S. sales rose only 0.7 percent year over year, according to IDC.
This does not bode well for the third quarter, he added. "It doesn't seem like you can sustain that. It makes us wonder if things will pick up. We may experience a drop in Q3."
Blade server sales slowed slightly but are still showing incredible gains. Blade revenue in the second quarter grew 40.8 percent over the second quarter of 2007. Blades accounted for $1.2 billion in the second quarter, representing 8.8 percent of the total quarterly revenue. HP (NYSE: HPQ) was tops, with 53.3 percent market share, IBM was number 2 with 24.8 percent share.
The big winner of the quarter was IBM's System z servers running z/OS, which grew 31.7 percent year over year to $1.6 billion. IBM mainframes running the z/OS operating system accounted for 11.8 percent of all server revenue in 2Q08. Who said the mainframe is dead?
Coming in right behind IBM is Dell (NASDAQ: DELL), which experienced the strongest x86 revenue growth of the top five OEMs, with factory revenue up 14.1 percent year-over-year, unit sales up a remarkable 24 percent and the company gaining 2.4 points of share. Scaramella said it was due to Dell's new datacenter offerings.
"It used to be for megadatacenters, people either built their own systems like Google did, or they went with Rackable," he said. "Now all the tier ones have something out for megadatacenters, and Dell was first to market and they had several deals come out that would have boosted an otherwise lackluster quarter."
HP led the market with 33.9 percent of the overall x86 revenue share, followed by Dell in second place with 24.7 percent of the market and IBM in the third place with 16.3. percent.
Linux servers posted year-over-year revenue growth of 10.0 percent, giving Linux servers 13.4 percent of all server revenue, up from 9.4 percent a year ago. Sales of Microsoft Windows servers, however, were flat, showing just 1.7 percent growth but holding 36.5, the largest dollar share on the market.
This article was first published on InternetNews.com.