Server revenue could slow in 2008, after strong 2007

The global server market could be headed for a slowdown this year, market researcher IDC said Wednesday, after one of the strongest years ever in 2007.

Server revenue in 2008 could be impacted as the market looks for an economic slowdown in 2008, IDC said. 

"The impact of the economy on the IT infrastructure market will depend on the duration and severity of the downturn," said Matt Eastwood, group vice president at IDC. The housing and mortgage crisis in the U.S. could have a ripple effect around the globe and slow down consumer spending, Eastwood said.

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The global server market could be headed for a slowdown this year, market researcher IDC said Wednesday, after one of the strongest years ever in 2007.

Server revenue in 2008 could be impacted as the market looks for an economic slowdown in 2008, IDC said. 

"The impact of the economy on the IT infrastructure market will depend on the duration and severity of the downturn," said Matt Eastwood, group vice president at IDC. The housing and mortgage crisis in the U.S. could have a ripple effect around the globe and slow down consumer spending, Eastwood said.

"Some projects may well be deferred and this could have some impact on the market and flatten out growth during 2008," Eastwood said. However, he doesn't expect a massive reduction in server spending to occur in 2008. (Compare Server products.)

That said, slower spending could give legs to initiatives such as consolidation of IT resources and virtualization which have fairly short paybacks and high return on investments. "These types of projects will be largely recession proof particularly in the enterprise space," Eastwood said.

Concerns for a server market slowdown in 2008 come on the heels of strong revenue growth in 2007, which was driven by increased IT spending and a growing adoption of x86 and blade servers.

Server revenue hit $15.65 billion in the fourth quarter, boosting 2007 to its highest level since 2000, said Jean Bozman, research vice president at IDC.

Full year server revenue reached $54.42 billion, the highest since it topped $61.6 billion in 2000, following which the dot-com bust contributed to an economic downturn and dropped server revenue, Bozman said. Worldwide server unit shipments for 2007 were 8 million, an increase of 6.7% from the previous year.

IBM topped the 2007 full year server revenue rankings at $17.3 billion, for a 31.9% market share and 1.1% yearly growth. Hewlett-Packard was second at $15.4 billion in revenue, followed by Dell, which had $6.15 billion and recorded the strongest yearly growth, 12.4v.

The fourth quarter of 2007 was the seventh straight quarter in which server revenue posted gains, Bozman said. It was driven by a rapid rise in blade server revenue, which countered a quarterly year-over-year fall in revenues from high-end and mid-range servers.

During the quarter, blade server revenue grew 54.2% and shipments increased 35.6%, IDC said. The server infrastructure is moving towards modularization, adopting technologies like blade servers that drive up scalability without huge investments, IDC said.

IBM retained the top spot in fourth-quarter revenue, hauling in $5.75 billion, up 0.5% over the previous year and good for a 36.7% share of the market. Hewlett-Packard, in second place, had server revenue of $4.34 billion, up 6.3%. Dell took third place, recording revenue of $1.58 billion, a 6.8% increase. Sun's server revenue dropped 2.4% year-over-year to $1.46 billion, and it fell to fourth from third place in the ranking. Fujitsu/Fujitsu Siemens saw quarterly revenue shoot up 7.1% to $666 million to come in fifth.

The IDG News Service is a Network World affiliate.