Thursday, August 28, 2014

Server Sales Pass Go! Collects $200 As The Market Sees Turnaround

According to a recent report from IDC, server sales are on the up and up, which is great news due to the extremely slow sales figures that have plagued the market recently. In addition to that, IDC also claims that server sales are likely to stay on the increase well into 2015 and beyond.

Growth last quarter was minimal with worldwide server revenue increasing only 2.5% from the previous year. The news of an increase in sales will be welcome news to server makers as they have faced five consecutive quarters of server sales decline. In addition to that, server markers are also benefiting from the start of a cyclical refresh cycle. According to IDC, customers are now starting to replace systems that they employed soon after the financial crisis.

However, there are other factors at work as well, says IDC Analyst Kuba Stolarski. According to Stolarski, sales of x86 servers have been strong for quite a while and have been increased by companies like Google and Facebook that are building out their massive infrastructures. On the higher end of the market, sales of Unix and mainframe systems, which are traditionally more expensive, have been in decline which has also slowed down the overall market. The good news here is that these products make up a small enough part of the market that x86 gains are able to make a positive influence.

Moreover, sales of anew midrange server system, converged infrastructure products sold by companies like Cisco and VCE, have been increasing and contributing to overall growth. This has also allowed the server market to show some growth in the April-June quarter. Factory revenue across the globe also reached $12.6 billion, an increase from $12.3 billion last quarter. In addition to that, two upcoming developments also mean growth should continue and accelerate, according to IDC.

One of these developments is the release of servers based on Intel's Grantley Xeon server platform. These servers are expected to debut at Intel's developer conference in San Francisco next month. In most cases, a new chip typically spurs a new wave of server purchases. Still a long ways out of development, Microsoft is planning on ending support next year for its Windows Server 2003 OS. This product is very widely used so the discontinuation of it should prompt more people to upgrade.

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Stolarski warns, however, that anybody expecting Microsoft's server business to experience the same thing its operating system business did with Windows XP shouldn't get their hopes up. This transition, Stolarski says, will be slower and some customers will most likely keep their existing hardware and simply upgrade their operating system.

The server market overall saw HP leading the pack once again with 25.4% of revenue, a slight increase over last year. Cisco had the biggest increase overall, expanding its revenue 35.4%. The company still has a small share overall at only 4.4%, though IDC notes that it took joint fourth place in the market with Oracle, who also saw a slight increase in sales. IBM was on the opposite side of the spectrum. The company is in the process of selling its x86 server business to Lenovo and also saw its sales drop 10%. Dell, which recently became a private company, also saw a decrease in sales of 6.5%.

Even though some companies experienced decline, the server market as a whole is looking up. With things reaching the end of their life users will be looking, if not forced, to upgrade to new systems. Servers based on Intel's Grantley Xeon server platform should be a great stepping stone in spurring a nice refresh for the server industry as a whole.