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Worldwide Server Market Spending to Decline 22% in 09

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But Market Shows Signs of Stabilization, According to IDC

According to IDC’s Worldwide Quarterly Server Forecast, customer spending in the worldwide server market is expected to decline 29.6% to $10.6 billion in the second quarter of 2009 (2Q09). This represents the fourth consecutive quarter of year-over-year spending decline for servers and a further acceleration in the pace of worldwide market deterioration.

In total, IDC forecasts that the market will see eight quarters of year-over-year revenue declines and expects annualized 4-quarter rolling server spending will drop by 30.3% or $19.1 billion during the 2Q08 to 2Q10 period. Additionally, IDC believes 2Q09 represents the largest year-over-year server sending decline the market will experience in this negative business cycle as the rate of market decline improves significantly in the second half of 2009 and early 2010.

“IDC has lowered its 2Q09 forecast by 8.5% or nearly $1 billion from our previous forecast as the depth of the worldwide recession increased in the first half of 2009,” said Matt Eastwood, group vice president of Enterprise Platforms at IDC. “Although we are now forecasting a 22.1% year-over-year decline in server spending for 2009, the worst of the market contraction is behind us. In fact, by the end of the third quarter this year, nearly 90% of the cumulative market contraction will have been realized as the market begins exhibiting significant signs of stabilization. It’s important to note that IDC believes many IT users will begin making strategic compute platform decisions during the remainder of 2009 in advance of improving business conditions and server demand in 2010.”

In calendar year 2009, spending on volume systems will decline 21.5% year over year on an 18.5% year-over-year decline in unit shipments as market conditions for the segment begin to improve modestly in the second half of 2009. Midrange enterprise demand is expected to weaken in 2Q09 with 2009 spending down 9.6% year over year. High-end enterprise spending is forecasted to decline 35.2% year over year in 2009 as capital budgets in large enterprises remain constrained throughout the year. In total, server spending is forecasted to be down 22.1% year over year in 2009 on an 18.3% year over year decline in units:

Worldwide Server Revenue and Year-Over-Year Growth Forecast, 2008-2013
(revenues in US$ millions)

REVENUE

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Server Class 2008 2009 2010 2011 2012 2013
Volume $31,386 $24,611 $25,659 $27,278 $28,726 $30,112
Midrange Enterprise $12,536 $11,337 $11,144 $10,873 $10,975 $11,248
High-End Enterprise $13,164 $8,530 $7,486 $7,402 $7,357 $7,175
Total $57,087 $44,478 $44,289 $45,553 $47,057 $48,535
GROWTH
Server Class 2008 2009 2010 2011 2012 2013
Volume N/A -21.5% 4.3% 6.3% 5.3% 4.8%
Midrange Enterprise N/A -9.6% -1.7% -2.4% 0.9% 2.5%
High-End Enterprise N/A -35.2% -12.2% -1.1% -0.6% -2.5%
Total N/A -22.1% -0.4% 2.9% 3.3% 3.1%

Source: IDC Worldwide Quarterly Server Forecast, June 2009

IDC’s Server Taxonomy
IDC’s Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers (servers priced less than $25,000), midrange enterprise servers ($25,000 to $499,999), and high-end enterprise servers ($500,000 or more). The revenue data presented in this release is stated as customer revenue for a server system. IDC presents data in terms of customer revenue, or end-user spending, to better represent the total amount of spending in the server market for forecasting purposes. Customer revenue represents the amount of money paid by end users for products and IDC uses customer revenue to illustrate our server forecasts because many of our clients find spending to be a more useful concept than vendor revenue for market planning.

IDC’s Worldwide Quarterly Server Forecast is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly shipments (both ISS and upgrades) and customer revenue, segmented by region, operating system, price band, form factor, CPU type, and architecture. For more information, please contact Hoang Nguyen at 508-935-4718.

About IDC
IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. For more than 45 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world’s leading technology media, research, and events company.

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